The COVID-19 pandemic has been hard on a lot of people and entities, including businesses both small and large. With strict shelter-in-place rules across the nation, designed to slow the spread of the virus, many businesses have had to shut down or go on hiatus until they can open again.
The federal government passed the CARES Act and the Families First Coronavirus Response Act (FFCRA) in March 2020, attempting to help businesses stay open and keep employees paid. They offer a few different options, including the Paycheck Protection Program and the Economic Injury Disaster Loans, as well as tax credits and deferrals. This is the best time to sit down with your accountant in Jamestown, ND to discuss what your 2021 filings might look like, and what you can do to get the maximum amount of relief.
Here are some of the new IRS options available:
- Payroll tax deferral: Under the CARES Act, an employer may defer their employer Social Security taxes for the March 27, 2020 to December 31, 2020 period. They have until the end of 2021 to pay at least half of the taxes back, and until the end of 2022 to pay the full amount. This might be a good option if you expect your income to increase in 2021 and simply need a quick boost to get through the rest of 2020. However, it’s easy to forget that this will all need to be paid back, so make sure you talk with your accountant about how to budget for this eventuality.
- Paid sick leave tax credit: If your company has under 500 employees and you pay any of them sick leave, you may qualify for this tax credit. The FFCRA gives a credit for the full amount of sick leave and sick pay under the act, which is determined by several different factors, such as the reason the employee took the sick leave. Talk to an accountant about how the law applies to your company.
- Employee retention tax credit: This tax credit is under the CARES Act, and applies to certain businesses. First, they must not have received a Small Business Association loan under the Paycheck Protection Program, and second, they must have either had their operations partially or completely suspended during the COVID-19 pandemic, or their gross receipts for the 2020 quarter declined by more than half as compared to the same 2019 quarter. Employers can receive a tax credit for part of the wages paid to those not working, capped at $5,000 per employee.
- Net operating loss carryback: Finally, you can now carry back 100 percent of your net operating losses from 2018 to 2020 to the prior five tax years. This new rule was made under the CARES Act, and applies to many different types of owners and employers. Talk to your accountant to see how it could help you.
When you’re ready to seek professional tax services in Jamestown, ND, look no further than Craig S. Hanson, CPA. Call today for your free consultation.