Written By: MB Group
As if 2020 wasn't already tumultuous enough: tax season is upon us. And just like every other facet of life, COVID-19 has indeed had an impact on taxes. If you're not careful and meticulous about your tax planning, COVID-19 tax laws and issues could cause you to stumble and make a very costly mistake. Fortunately, you have options.
The Families First Coronavirus Response Act (FFCRA) featured a range of provisions that can have an impact on businesses of all sizes. And one of those key provisions is the requirement that some employers provide new paid family and medical leave, paid sick leave, and new tax credits for paid leave. When filing your taxes, it's critical to understand the implications of this COVID-19 tax law.
One of the most popular pieces of legislation passed as a result of COVID-19 was the Coronavirus Aid, Relief, and Economic Security or CARES Act. Passed in March 2020, the CARES act opened the door to large-scale assistance to individuals as well as businesses. For example:
The Paycheck Protection Program (PPP) emergency loan program is one of the largest and most essential components of the CARES Act. This part of the law was meant to distribute over $600 billion in forgivable small business loans. To qualify for loan forgiveness, at least 60% of the loan must have been spent on employee payroll; while the remaining amount could be used for rent, mortgage interest, and other utility payments. All forgiven PPP loans are exempt from taxes, but there are other considerations you should discuss with the CPAs at MB Group.
Passed in June of 2020, the PPP Flexibility Act made significant changes to the PPP Loan program. In short, it simplified the process of receiving loan forgiveness. In terms of your taxes, the key impact was that employers who received a forgiven PPP loan could still take advantage of any payroll tax deferrals offered in the CARES act.
The Economic Injury Disaster Loan (EDIL) program was created by the Small Business Administration well before COVID-19. This program was designed to assist small businesses through disasters. The SBA and Congress made alterations to the EDIL program to provide more cash advances and loans. It's important to understand that some of these distributions are taxable. Make sure you work with your accountant for the specific implications of this COVID-19 tax law.
Related: PPP vs EIDL
As a small business owner, you are the heartbeat of the American economy. To ensure the economy remains afloat through the pandemic, the United States government has passed down several different pieces of legislation. Although these new laws have helped millions of businesses, they have created a host of new accounting and tax changes. Attempting to keep up with them all can be challenging — or outright impossible. However, you don't have to do it alone! The team at MB Group can help.
Contact us today to learn more about how COVID-19 laws can impact your taxes.
Tags: tax planning Retirement
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