Unless the business is Amazon, most businesses really had to suffer economically from COVID-19. The disease didn’t just hit the health of millions of people around the world, it also affected the majority of the businesses.
The worst part is, even if businesses took a financial hit this year, they still need to settle their taxes.
There are also various changes this year because of the coronavirus pandemic. Some businesses, for example, had to revise their work design so that employees can work from home.
Another change that businesses have to employ in their ledgers is the Paycheck Protection Program (PPP). This is a loans program under the CARES (Coronavirus Aid, Relief and Economic Security) Act to help small businesses pay their employees.
PPP covers payroll costs as well as benefits. Interests on rent, utilities and mortgage are also covered. There is also a provision under the CARES Act for loan forgiveness on a part of the PPP loans or all of it. But that would depend on how the loan was used.
The Internal Revenue Service has recently clarified that expenses from the forgivable loans are not tax deductible.
The best thing to do for businesses is to start reviewing their tax requirements so that they can make the best possible decision in order to optimize the benefits of the tax laws and reliefs.
The work-from-home arrangement may seem like a good thing. It may be complicated at first, but as soon as the system is in place, it’s more convenient for the employees. It’s a different situation for management.
Business owners, on the other hand, have to keep track of where the employees are working from. If they are working from a separate state, this could prompt confusion.
It has to be noted that each state has a different set of tax regulations. If this is the case, businesses need to seek assistance immediately before it’s too late.
Businesses should really look at the benefits of cost segregation analysis. This is a strategy that allows owners to separate some of its assets from the real estate itself. This way, the assets that are normally part of the building, will be depreciated much quicker. The result is that this will become part of the deduction and cash flow will increase.
The CARES Act also has its own provision that makes the cost segregation study even more beneficial to real estate owners. Qualified improvement property also took in a new meaning. There is now any improvement to an interior section of a building characterized as non-residential property as long as said improvement is placed in service at a later date than was first placed into service.
The accelerated depreciation could mean a deduction of the entire amount of the property the year it has been acquired.
With or without the CARES Act, profit sharing is always a sound advice. This is the process of using retirement plans to cut down taxable income at the end of the year.
All these could really help out businesses, which has since been suffering since the start of the pandemic.
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