Your business is your passion. In the wake of the COVID-19 pandemic, your pride and joy may be going through an unprecedented time. The U.S. Government has passed legislation to help, both through immediate financial assistance and tax relief. In this article, Bryant Consultants wants to explore the tax credits and changes made to aid small businesses like yours.
- Employee Retention Tax Credit: The ERTC gives business owners incentives to keep employees on their payroll, offering a refundable tax credit of 50 percent up to $10,000 worth of wages per employee. If your business had operations partially or fully suspended due to a shutdown related to the coronavirus, then you’re eligible for this credit. Your business also will be eligible if your gross receipts from this quarter declined by more than 50 percent compared to the same quarter in 2019.
- Sick and family leave: If your business has fewer than 500 employees, you’re now required under the Families First Coronavirus Relief Act to provide paid sick and family leave for issues related to COVID-19. The government is reimbursing these expenses through a refundable credit equal to 100 percent of the total benefits, which is paid every quarter. If cash flow is a concern, businesses can use the employer portion of payroll taxes to pay for these leave benefits. The U.S. Treasury will reimburse any additional money that was paid in benefits at the end of the quarter.
- Delayed payroll tax payments: This applies to both business owners and the self-employed regarding payroll and Social Security tax and deposits owed for 2020. You can defer these payments and make them over the next two years—under the provisions that you pay 50 percent of the total deferred by the end of 2021 and the remainder by the end of 2022. Please note these deferments are not an option for any business that receives a loan from the Paycheck Protection Program.
- Expanding charitable gift deductions: Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the government expanded provisions for charitable cash gifts, which now can equal up to 25 percent of taxable income. That’s a big jump from the previous limit, 10 percent of taxable income.
- Net operating loss changes: Net operating losses (NOLs) from the tax years 2018 through 2020 now can be carried forward by as many as 10 years. This can help improve cash flow and liquidity if those are issues your business or sole proprietorship is struggling with at this time.
- Deduction changes: The CARES Act halted the deduction for business losses on individual returns. Previously, business losses that exceeded $250,000 for individuals or $500,000 for couples were non-deductible, with any excess amount carried forward. The CARES Act suspended these limitations on losses from 2018 through 2020. This means that, if your losses were limited in 2018 and 2019, you could file amended returns to receive refunds for the additional losses. You also can increase your business interest expense deductions for 2019 and 2020, from 30 percent to 50 percent.
- Facility improvements: A provision as part of the CARES Act means commercial property owners can write off costs associated with improving the interior of non-residential buildings immediately. Deductions also are increased to 100 percent of the cost.
We recognize this is a challenging time for everyone, including business owners. You can trust the experts at Bryant Consultants to help. We continue to provide consultation, training, and coaching and will continue to post relevant updates regarding the coronavirus pandemic. To ensure that you receive the latest updates, please follow us on Facebook and Instagram. Contact us directly by calling (877) 768-4799.
