Just like every other industry, the pandemic has had a profound effect on the government contracting industry. However, government contracting still can promise a profitable future for small businesses.
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.
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.
Self-Employed people should keep in mind that all advertising costs are fully tax-deductible.
This can include the following
- The cost of printing business cards, flyers, and mailers
- Social media advertising like Facebook ads
- Promotions at conventions and trade shows
- The cost of advertising agencies
- Television and radio advertising
- Employing freelancers
You can also deduct all commissions paid to non-employees for sales and marketing purposes. This can include payments to individual sales reps, or marketing channels and a platform like Amazon.
Any Labor That is Contracted
This includes all fees paid to independent contractors. If you hired a graphic designer to style a logo for you or contracted with a developer to make your website, their fees are fully tax-deductible.
If you paid a contractor $600 or more over the course of the year, you’ll even have to file Form 1099-MISC.
If you have a business asset that is expected to last more than one year, you can depreciate the cost of the asset over its life rather than deducting the cost of the asset the year that you purchase it. Depreciation is fully deductible. Examples of assets that can be depreciated are:
- Technology like computers
- Improvements to leased property
You can not include inventories, stock-in-trade, and land cannot be as a depreciated tax deduction.
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.
If you have employees and provide health insurance and other benefits then you can fully deduct the costs of those benefits.
This Is Just the Tip of the Iceberg
Join us for the second part of this series to find out about even more fantastic tax deductions for the self-employed.
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:
- New York
- New Jersey
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.