The United States government continues to issue tax relief legislation and other policies to help individuals and businesses. However, the pandemic and its tax implications always find ways to affect your business tax liability.
So how has the pandemic changed tax liability in the United States? What should you know about business tax liability so you can continue to prepare for what’s to come?
That’s what we’re here to look at today. Read on to find out more about business tax liability and its impacts during COVID-19.
The Paycheck Protection Program
The federal government enacted the Coronavirus Aid, Relief, and Economic Security Act in March of 2020. Other programs, such as the Paycheck Protection Program ,helped those who lost their jobs at this time.
However, one of the implications of the PPP was that businesses who signed onto the program had to incorporate this into their tax filings. Many were unsure how they were supposed to file for this program due to how new it was.
The program is no longer functioning, but many were still left confused about how it affected their taxes come tax season. It’s important to note that the PPP funds are categorized as a loan, with loan forgiveness available.
Whether or not a business received loan forgiveness, the PPP funds aren’t counted as revenue. Those who received PPP funding could still take out Employee Retention Tax Credit, though some earnings were not allowed.
Tax Impact of Telework
Another crucial change during the first few months of the pandemic was the growth of telework or work-from-home. With non-essential workers opting to stay out of the office,businesses adjusted their tax filings accordingly.
For example, an employee might be working from a home that is out of the state of their business. This puts their state residency into question.Both the business and the state government need to consider this.
Businesses currently need to remain mindful of these requirements, even as in-office work resumes. Another thing to consider is payroll withholding. How does an employee move to a different state affect tax liability?
How This Affects Your Tax Planning
It’s no secret that different government relief programs and work-from-homes are changing the tax landscape. As such, businesses should start tax planning sooner than later.
In other words, businesses and CPAs should do more research on their business moves over the past few years to see whether they need to adjust their filing. That way, they are ahead of the curve once they start filing.
Hiring a CPA is a great way to ease this process. Small Business Development Centers, a service provided by the SBA, is a great resource for small businesses.
Understanding Your Tax Liability
Business tax compliance is complicated practically any year, and the pandemic didn’t make anything easier. Use this guide to help you understand how to navigate your business tax liability and start filing the right way.
Are you looking for reliable business planning and accounting services?Contact us today,and we’ll provide a solution that’s right for you.
Parker Business Consulting & Accounting, P.C. is a unique firm with more than a combined 75 years of experience in the private industry, coupled with a strong background in public accounting. This combination enables us to provide valuable assistance based on direct experience with many of our clients’ same issues.