Are you ready for the 2021 tax season?
As a business owner, you’ve had a long, challenging year. Until you get through the 2021 tax season, it’s not quite over yet. If you’re like many businesses, your 2020 was all about lockdowns, layoffs, financial difficulties, reopening, sanitizing, and other pandemic-related issues.
You had a lot going on in 2020. That means that your 2021 tax season will require a lot of preparation and documentation. You’ll also face new challenges as you decide whether or not your business expenses are tax-deductible. Here are some of the recent changes to consider.
Small Business Assistance Programs
The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 offers additional help for small businesses. It includes disaster relief grants for low-income communities and funding for theatres, live venues, and cultural venues. These changes shouldn’t make a difference in how you file your taxes until 2022, but several CRRSSAA provisions can affect your 2021 tax season.
Paycheck Protection Program
The rules for this program changed a few times already. CRRSSAA added a few new twists at the end of the year. In the original PPP loan program, you qualify for forgiveness or a loan deferment. If you used the funds for covered business expenses (rent, mortgage interest, or payroll), you could apply for forgiveness.
An IRS follow-up notice explained that you couldn’t deduct the covered business expenses during the 2021 tax season if you qualified for loan forgiveness. The CRRSSAA made several additional modifications.
- CRRSSA removed the tax-deduction ban. You may now receive loan forgiveness and tax-deductions for covered expenses paid with your PPP loan.
- Your business may qualify for a second PPP loan (or an initial loan if you didn’t apply the first time.) The new loans go to companies that can show a 25% reduction in revenue.
- Previously unqualified businesses may now qualify for the latest round of PPP loans. These include nonprofits, local newspapers, radio and television broadcasters, and destination marketing organizations.
- If you are eligible for a new loan, you have more options for using PPP funds. You may pay for property damage due to public disturbances, personal protective equipment, federal health and safety compliance measures, and other items.
In September 2020, employees could decide to defer their portion of FICA tax payments due. Initially, they had to repay the deferred amount by the end of the 2021 tax season. If your employees chose the FICA deferment option, they now have until December 2021 to complete their repayments.
Employee Retention Tax Credit
The retention credit helps employers keep employees on the payroll. CRRSSA extends this CARES Act credit through June 30, 2021. It increases the credit from 50% of an employee’s wages to %70, and it increases the maximum benefit from $10,000 per year to $10,000 per quarter. This credit affects both the 2021 tax season and 2022.
You Need a Bookkeeper
As we consider the 2021 tax season, we must reiterate the many professional bookkeeping benefits. At Goode Bookkeeping and Consulting, we provide quality bookkeeping services for small to medium businesses. We track our clients’ financial data all year long. We organize their information so they don’t have to pull a last-minute tax season marathon.
Our team works remotely, efficiently, and economically. We provide financial reports on-demand, so our clients enter the 2021 tax season confidently.
Contact Goode Bookkeeping and Consulting
For more information about our bookkeeping and back-office services, call us at (860) 968-2345, or complete our consultation form. We’ll schedule a free appointment.