Finding Tax Relief During Coronavirus

Has your business been affected by the Coronavirus pandemic? While many companies have experienced a slowdown or complete loss of income, some businesses are busier than ever trying to keep up with the demand (grocery stores, hospital workers, and more). If you are experiencing a negative impact on your cash flow, then you might be looking for solutions to keep up with overhead costs and ongoing payments. Don’t overlook the benefits available from various tax relief programs that could be used to help your business get through this challenging time.

Why is Tax Relief Available?

Not only is the government working to stimulate economic activity, but these funds are designed to protect vulnerable businesses and individuals. These tax relief programs provide the space and liquidity needed to make it through the reduced spending that is happening due to the virus outbreak. As businesses are closed for health reasons and families are sheltering in place at home, the overall spending has dropped.

It’s a cycle that needs to be corrected: businesses close due to health concerns, causing many employees to lose their jobs. As millions of people across the country are out of work, it slows down the spending happening in all industries. There’s no question that this economic situation will have a trickle-down effect that could last for years.

These tax relief programs are designed to infuse more cash into the economy, helping to mitigate the current concerns and avoid bigger economic issues down the road. The purpose of the programs is to assist with immediate needs and also decrease the potential rebound time as we return to “business as usual” when the crisis is over.

CARES Act: Support for Employers

The Families First Coronavirus Response Act, as well as the Coronavirus Aid, Relief, and Economic Security (CARES) Act have been designed by the federal government to support the economy.

Refundable tax credits are offered for certain employers who continue employee payments during the COVID-19 pandemic. Additionally, penalty relief is offered through the Internal Revenue Service if employers are unable to make timely deposits for employment taxes.

The initial program authorized $2.2 trilling in spending to stimulate the economy, with ongoing decisions to add more money to the fund as needed. The goal is to provide meaningful tax relief to help businesses weather the storm of slow sales or closed doors.

Credits for Leave Wages

Leave wage credits are also offered as a way to minimize the risk of sick employees coming to work. Since the virus can be spread through airborne particles, it is important to keep employees out of the workplace if they have been exposed to COVID-19 or they are exhibiting symptoms of the virus. These tax relief programs encourage employers to maintain good sick leave programs to minimize the chances of employees passing the virus to other employees or customers coming into the business location.

This tax relief is offered in the form of two refundable tax credits:

  • Qualified Sick Leave Wages Credit
  • Qualified Family Leave Wages Credit

Employers are provided with the funds to pay their employees for sick and family leave between the dates of April 1, 2020 and December 31, 2020. These credits are calculated against the portion of Social Security taxes due on wages paid during this same time. In the situation where the credit exceeds the employer’s liability for Social Security taxes, then the credit will be treated as an overpayment – which means the difference will be refunded. Employers must be found eligible to qualify for these tax relief programs.

Employee Retention Credit

One important detail of the CARES Act for employers is a refundable tax relief credit known as the Employee Retention Credit. This tax relief is offered for “eligible employers.” You must pay “qualified” wages to employees between the dates of March 13, 2020 and December 31, 2020.

The credit can cover up to 50% of the paid wages. There is a cap of $5,000 per employee as a maximum credited. As with the Credits for Leave Wages, the Employee Retention Credit is calculated against the Social Security tax due for wages paid during this time. If the tax credit is more than what the employer owes in Social Security taxes, then the difference will be refunded as an overpayment.

Employers can access this credit through their Form 941 filing. But a faster benefit of the credit can be accessed by reducing the amount paid for federal employment tax deposits. Instead of paying the full amount due, employers can decrease their deposits based on the amount they are entitled for Employee Retention Credits.

Employers must meet specific eligibility requirements to qualify for these tax relief credits. For example, the credits are generally offered to businesses and tax-exempt organizations who meet either of these qualifications:

  • Partial or full suspension of operations in the 2020 year because of a “Shelter in Place” or “Stay at Home” order in the local area
  • A significant decrease in gross receipts is experienced in the year 2020

It is also important to note that if an employer received money through the Paycheck Protection Program, then they do not qualify for the Employee Retention Credit. Even if the above eligibility is met, employers can’t receive funds from both tax relief programs.

Tax Filing and Payment Delays

In an earlier blog post here on Easier Accounting, we shared details about the way the economic downturn impacted the tax filing deadlines and payment due dates. Many businesses and individuals have taken advantage of the opportunity to wait on the payments.

To summarize these tax relief deadlines, the due dates for 2019 filing, payments, and estimated tax payments were pushed from April 15, 2020 to July 15, 2020. This change in payment schedule relieves some of the current financial pressure on businesses of all sizes, as well as independent contractors and families. The delayed policy covers most taxpayers – anyone who has been negatively impacted by the coronavirus outbreak.

Other related payments have also been postponed to match the change in tax filing and payment dates. For example, many states have followed suit to push back state tax deadlines to July 15, 2020. Additional postponements include deadlines for HSA and IRA contributions. If you would like to contribute for year 2019, then this deadline has been postponed to July 15th as well.

Individual Economic Payments

Even though many of the tax relief programs are designed to support businesses so paychecks can continue, the stimulus plan also includes economic impact payments paid to individuals. This aspect of the program has been highly publicized through the news outlets, with many families counting on these payments to pay rent and buy groceries.

The payout is $1,200 for an individual or $2,400 for a married couple. Dependent children under the age of 17 qualify for $500 payments per child. Keep in mind that the payments are phased out based on the adjusted gross income (AGI) of the household). The payments are distributed as a tax credit, so you do not need to include the payment as taxable income on your tax filing for year 2020.

Millions of Americans have already received these stimulus payments, with additional checks on the way as the IRS works to distribute the funds across the country.

Personal Tax Guidance for Your Business

Even though we have shared important information about the tax relief programs that have been implemented, you need to be aware that specific eligibility requirements need to be met. Unless you are following the new tax guidelines and ongoing changes closely, and you have a trained background in accounting and finance, it is best that you talk to an experienced accountant for personal recommendations.

Yes, there are tax relief programs available to help employers and individuals. But it is essential to understand the full scope of the programs to ensure proper implementation for your tax credits. Our team is working hard to stay current with all of the changes happening in the accounting industry, giving you access to a trusted group of accounting experts. If you are wondering about your options for tax relief or tax credits, then contact us for more information.

At Easier Accounting, we offer much more than basic tax filing services. We are focused on the ongoing tax strategy you need to keep your business up-to-date with whatever might be happening in the economy. Not only do we evaluate the overall picture, including policies and available tax credits, but we also consider your unique situation to support your tax strategy. The goal is to help you stay within the guidelines as set by the IRS and other government entities, while minimizing your tax burden when possible.

If you are interested in more information about tax strategy, or other accounting services, then feel free to contact us to learn more. We offer a range of accounting services, with a focus on small businesses. Over the years, our team has established a strong reputation in the industry. We’d like to show you the potential benefits your business can receive through our available services. Contact us at Easier Accounting by calling (888) 620-0770.

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