How Covid Has Affected Small Business Taxation

The recent COVID-19 pandemic has turned the world upside down. Many people have lost or been furloughed from their jobs. There is high anxiety all around. The Pandemic has changed everything and small businesses and the United States government has passed legislation for tax relief for smaller companies. They are as follows:

We at Tax Resale Certificate understand that many people are very nervous right now. We wanted to point out that there are some tax credits or changes that small businesses should understand if they have been affected by COVID-19.

Caps On Business Loss Deductions Were Halted

The Coronavirus Aid, Relief, and Economic Security (CARES)fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries.

The CARES Act has halted the limitation rule on small business losses being capped at $250,000 for individuals and $500,000 for couples. This applies to 2018 to 2020, with business owners who had their losses limited before this year, being able to file the amended returns needed to receive refunds.

Increase In Interest Deductions For Small Businesses

The CARES Act allows you to increase the amount of interest expense that you are allowed to deduct from 30 percent to 50 percent. This applies to tax returns filed in both 2019 and the ones filed in 2020.

Employee Retention Tax Credit

This credit was designed to help companies retain employees while facing pandemic hardships. Businesses will be eligible for this credit if operations were fully or partially suspended due to the coronavirus shutdown. You can also be eligible if gross receipts for your company went down more than 50 percent compared to the same time period in the previous year.

Eligible businesses can get a refundable 50% tax credit on wages with a maximum of $10,000 per employee. The credit can be obtained on wages paid or incurred from March 13, 2020, through December 31, 2020.

Employers will need to report total qualified wages and related health insurance expenses on their quarterly tax returns on Form 941. This needs to be done in the second quarter of 2020. The Employee Retentions tax credit can be taken against the employer’s share of Social Security taxes.

Family And Sick Leave

Employers will be 100 percent reimbursed for providing sick and paid family leave to employees for reasons related to the Coronavirus, by a tax credit. This will be paid every quarter. Employers will also be able to hold on to their portion of payroll taxes to be deposited and use this money to pay for the sick and family leave. There will be no penalty for businesses that do not deposit payroll taxes because they were anticipating a tax credit.

Deferred Payroll Taxes

The CARES Act is allowing businesses to delay payroll tax payments. These payments, which include Social Security tax and 2020 payroll deposits, can be deferred and paid within the next two years. The government is allowing for 50 percent to be paid by the end of 2021 and 50 percent by the end of 2022.

The Expansion Of The Charitable Gift Deduction

Before the CARES Act, charitable cash gift deductions were not allowed to exceed 10 percent of taxable income. Now, because of the pandemic, it has been increased to 25 percent. This change will have to be elected and does not occur automatically.

Changes In Net Operating Losses

The CARES Act has relaxed limitations on net operating losses. These changes allow for 100 percent of net operating losses from 2018, 2019, and 2020 to be carried back up to five years. They can also be carried up to 20 years with an 80 percent limitation.

Make sure you meet with your tax advisor to discuss all the new tax credits and deductions available to your company this year due to the coronavirus

Let Us Handle The Hassle Of A Tax Resale Certificate

During these tough times, it is nice if someone takes a frustrating but beneficial task off your plate. That is why, here at Tax Resale Certificate, we handle all the headaches of registering for a tax resale certificate for you.

At Tax Resale Certificate,  we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate. 

We know that there is a lot of confusion in the world right now. Luckily, these tax credits will help ease some of the burdens. A tax resale certificate is a fantastic way to make sure your business is in great shape to take advantage of consumer demand once the dust settles. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. 

What is A Tax Resale Certificate?

It is critical that you understand that tax resale certificates can also be used on items that will be resold. Office supplies, such as new computers for your employees, would not fall under the category of retail.  It would be considered fraud not to pay sales tax on these items.

If this is confusing for you, just think of tax resale certificates as state tax exemption certificates.  Some states actually call them exemption certificates or reseller’s permits.

Getting A Tax Resale Certification Is One Of The Best Things You Can Do As An Entrepreneur

If you decide to start a business, a tax resale certificate can save you money on taxes.

In short, a tax retail certificate allows you not to pay sales tax on items that you plan to resell. This can also apply to supplies that are going to be used in products that you will resell, such as wood for a cabinet.

However, the process can be difficult and the rules are different for each state. That is why TaxResaleCertificate should do all the hard work for you. We can make sure that you get all the advantages of a tax resale certificate without having to deal with the hassle of government red tape. Let us handle the hard stuff so you can proceed to run your business with confidence. Make sure you check out our second blog in this series so you can learn even more valuable information about tax resale certificates.