Kale Goodman is a serial entrepreneur and has over 18 years of service in the accounting field.
Save Money As A Business Owner With tax Credits
Hey, Real Business owners! The pandemic has been challenging, but the Biden Administrations' new stimulus plan gives business owners a break for the next tax season. The Rescue America Act has finally gone through the senate as of March 11th.
With the Rescue America Act, the IRS will extend some tax credit deadlines. So when you go to file your 2021 taxes, you'll have these tax credits!
Since the Rescue America Act signing, many of the covid-19 stimulus programs like the Paycheck Protection Program appeared to help small businesses. Not only will these programs help with expenses during the next year related to covid-19.
The Continuation of Health Coverage or cobra tax credit ensures employees who lost their jobs during the pandemic don't lose their benefits. The cobra tax credit is a federal law that makes employers offer health insurance in their corporate benefits. It allows the employees whose hours were cut or laid off to keep their health insurance though they do have to pay. The cobra tax credit is extended from April to September. It encourages employers to keep paying the health insurance premiums of laid-off employees and, in return, receive a tax credit.
The Employee Retention Tax Credit assesses quarterly losses of a business. The business must have been shut down (partially or fully). Or a reduction in revenue of more than 20% to apply for this credit. If you are eligible for this credit, you'll need to prove that you lost that revenue compared to the same quarter in 2019. The Employee Retention Tax Credit was launched in the March 2020 Cares Act and allowed an employer to claim a credit up to $7,000 per quarter per employee depending on the employee's payroll wages. What's interesting about the Employee Retention Tax Credit is that if the credit is bigger than what the business owed, they can get that difference back in cash.
Another tax credit for businesses that lost money in 2018,2019 and 2020 is the carryback of losses. For one time, a company can carry back the money they lost for up to 5 years. So when a business paid taxes for those years, the losses they had would lessen the amount they owed, and they would get that money back. It's unusual for taxes to have this carryback and will only be applicable for this year. It takes about six weeks for corporate amends to go through, so start ASAP!
If you had employees take time off for family matters to do with covid-19, there's a tax credit for that too. The Families First Coronavirus Response Act or FFCRA had employers compensate employees who had to stay home and watch over their children taking online classes or watch over family members affected by Covid-19. Business owners can get money back on federal payroll taxes. The FFCRA is no longer required, but if you decide to offer these benefits, including time off for vaccinations, it's extended through September.
Are you looking to hire someone now that things seem to be calming down? If that person is a veteran, off of welfare, or unemployed for more than six months, then you can claim a tax credit. The Work Opportunity Tax Credit will go all the way through 2025 and could be a huge benefit for employers who take advantage of it.
There are so many ways to take advantage of these tax credits! You can even get cash back for some of them. With the pandemic bringing some good to the businesses it hit so hard in 2020, there are ways to rebuild that lost revenue. See if any of these tax credits will work for your business, especially if you're looking to hire or lose revenue quarterly in 2018, 2019, and 2020.
© 2021 Kale Goodman