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. These tax breaks should help your business maintaing solid cash flow and ease some of your worries about the future.
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 actually receive refunds.
Corporate Alternative Minimum Tax Credits
The corporate alternative minimum tax is defined as “A variety of exclusions, deductions, and credits are available to corporations, which often allow them to reduce the amount of tax that they are required to pay on the income they earn, sometimes to zero. To ensure that these corporations pay at least some tax on their income, Sec. 55 imposes an alternative minimum tax (AMT), which requires many corporations to add back some of these deductions and credits and pay tax on this reconfigured amount.”
This was repealed in 2017 and the AMT was made available as refundable credits ending in 2021. The federal government is allowing businesses that were going to receive AMT credits at the end of 2021 to claim a refund now due to the pandemic.
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.
Writing Off Facility Improvements
The CARES Act allows businesses to start writing off the cost that comes with improvements to interiors of nonresidential buildings. This will expand the tax deduction to 100 percent of the cost and the deductions can be applied immediately. This is effective from 2018 to present, so businesses can actually amend older tax returns to recover costs from improvements made in 2018 and 2019.
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.
Businesses that are eligible 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 provide a tax resale certificate for the top states that include:
- California
- Texas
- Massachusetts
- New York
- New Jersey
- Illinois
- Florida
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.