It can be difficult to keep up with the yearly changes in small business taxes. However, it is crucial that you understand the changes made and how they will effect your business. Here are some changes to expect in the year ahead.
Thanks to last year’s pandemic, this year you’ll need to know all about the Coronavirus Aid, Relief, and Economic Security Act (CARES.) This is the act that enabled the Paycheck Protection Program (PPP,) to help small businesses acquire the cash needed to retain their employees, pay rent, and pay business utilities and mortgages. As long as you use this money for its intended purpose, you are not expected to pay it back. It can’t even be considered as part of last year’s taxable income.
This act also includes the Business Interest Expense Deduction Increases. While it previously increased by only 30%, due to Coronavirus is increased to 50% when it comes to your adjusted taxable income.
The Economic Injury Disaster Loan (EIDL,) was put into place to aid any business that was forced to shut down due to Coronavirus. This loan is extended by the U.S. Small Business Administration. While you won’t be expected to pay back any money received from EIDL, there will be taxes charged on it.
The Employee Retention Tax Credit (ERTC,) lets your business borrow money for the sole purpose of retaining your employees. You are only eligible for this credit if your business was not able to operate during the pandemic or if you lost more than half your expected sales during any quarter of the year because of it. The time period this covers is March 13th, 2020 and January 1st, 2021. You can get up to $10,000 for each employee you retained.
The Families First Coronavirus Response Act (FFCRA,) reimburses your business for any family or sick leave you granted to employees due to the virus. You can also get your money back for any employee healthcare plan expenses you incurred.
For more information on changes in small business taxes, please contact BT84 Commercial Capital & Business Solutions.