What’s happening in the realm of small business one year into the pandemic?
It has been a year and two days since former President Donald Trump declared a national emergency due to the novel coronavirus.
To date, we have lost nearly 520,000 Americans. This is more lives than we lost in World War 2. But as a nation, we have held together and much hope lies ahead. For one, President Joe Biden has announced that all U.S. residents will have access to the vaccine by May 2021. This promise could not come sooner for small businesses.
On a national scale the U.S. government has doled out 5 trillion in economic stimulus programs. Let’s take a look at what you can do as a small business owner to possibly benefit. Essentially there are five ways small businesses can either save on taxes or get financial relief. Read along to find out.
Employee Retention Tax Credit
This program has been extended to Dec. 31, 2021. It essentially enables a business to get a tax credit of up to $7,000, per employee per quarter. The catch is that to get the credit a business must show that it has been partially or fully shut down. Or it must show a revenue decline of more than 20% compared to the same quarter in 2019. If a business is found eligible they can take a credit of up to $7,000 per employee for each quarter based on wages they pay for payroll taxes owed. If the credit is larger than what is owed, the business can get the difference in cash.
Families First Coronavirus Response ACT Tax Credit
This legislation requires employers to continue paying employees if they had to take time off and/or if they or their family members were affected by Covid, including parents who had to stay home while their children attended classes online. This is no longer a requirement but still voluntary for business owners. The act allows a tax credit that a business owner can claim money back on their federal tax returns for the wages they were required to pay. The credit has been extended to September 2021.
Work Opportunity Tax Credit
This credit provides an opportunity for businesses to save on the taxes they would pay for new employees if they are a veteran or someone on welfare or someone who has been unemployed for 6 months.
Cobra Tax Credit
This requires employers to make health insurance available under the corporate health plans for the time period employees are laid off. The American rescue plan now subsidizes the continuation of Cobra benefits from April-September 2021. Also, there is a tax credit for employers who continue to pay for health insurance premiums for their employees.
Carryback Losses
Companies that lost money between 2018 and2020 for one time only can carryback those losses for up to five years. Those losses would reduce what was owed. If a company paid taxes in the past, those losses would reduce what was owed. Therefore, they could be due money back.
Overall, it has been a tumultuous time and the government is doing its best to help. It is tax season so be sure to talk to your accountant about what your possibilities for any tax credits or financial relief as a small business owner.