Small business owners have been severely impacted this year thanks to the COVID-19 pandemic. Those that haven’t had to shut down temporarily may be dealing with other issues such as supply chain interruptions or reduced business.
Business owners still have to pay taxes, but the IRS has offered some tax relief programs as relief. Here are four ways that the federal government is trying to help small businesses with tax-related programs.
1. Coronavirus-related Paid Leave
When your employees must take time off related to COVID-19, this can put a considerable strain on your business. Some employees have contracted the virus, must quarantine due to exposure, or have to stay home to take care of a loved one.
The federal government has agreed to cover an employee’s salary at 100% reimbursement for COVID-19-related leave for up to 80 hours of sick leave. A credit for child care and a paid sick leave credit are two other related benefits. The different paid leave relief options are outlined on the IRS website.
2. Employee Retention Credit
If your business had to shut down due to COVID-19 or your gross revenue has suffered, you may qualify for the Employee Retention Credit (ERC). For every full-time employee that you retain between March 13 and December 31, 2020, you will be eligible for a refundable credit of $5,000.
The ERC was created to encourage business owners to keep employees on the payroll, even if business is slow or you are unable to operate due to the pandemic. However, you won’t be able to qualify for this credit and the Payroll Protection Program (PPP) at the same time. The IRS gives more information about the ERC on its website.
3. Deferred Employment Taxes
The federal government is also allowing businesses to delay the payment of certain employment taxes. Specifically, you can defer paying your employees’ Social Security taxes and certain railroad retirement taxes. This also applies to people who are self-employed.
The deferral period began on March 27, 2020, and it ends on December 31, 2020. You will still have to pay these taxes, so use this benefit wisely. You can learn more about this solution on the IRS website.
4. IRS Virtual Workshop
While this isn’t a tax credit or deferral, the IRS has created a resource to help small businesses navigate their tax obligations. The virtual workshop on taxes is an excellent resource for small business owners to help them understand their obligations, including small businesses with specialized needs.
The tax code has changed drastically over the past several years, and it’s a lot to manage for businesses that are already impacted by COVID-19. There may be additional ways to reduce your tax obligations and plan for the coming year.
At Doerhoff & Associates CPA, we offer monthly bookkeeping, payroll, and accounting services to businesses that can streamline your processes, saving you time so that you can focus on running your business. Contact us today to learn more about how our services can help your business.