COVID-19 has fundamentally changed our country and our economy. As a result, our tax laws have changed to combat the economic downturn. The government has created many ways for businesses to remain afloat through loans, credits, and the use of incurred losses to recapture previously paid taxes. Every business and individual needs to be aware of the host of tax relief options available to survive this new economic environment.
The CARES Act, passed in March 2020, offered stimulus money for those who qualified; credits for retaining workers; credits for paying sick employees or employees needing to stay home to care for their children; and, most importantly, set up the PPP loan program for ailing businesses. In addition, there were several changes to existing tax laws that allowed taxpayers to take advantage of losses incurred as a result of a loss in business during the pandemic. Therefore, if you and/or your business have a net loss in 2020, you may be able to carry the loss back to profitable years and have the tax paid in those years refunded.
The second stimulus act, passed in December 2020, offers continued support for the businesses and individuals hit the hardest. For businesses still incurring losses, a new round of PPP loans is available, as well as the opportunity to continue deferring payroll tax payments. For many employers, the employee retention credit affability has been extended to June 30, 2021. If you have 500 employees or fewer and your gross revenue has decreased more than 20% from pre-COVID levels, you may be eligible to receive credits of up to $14,000 per employee.
Preparation is often the difference between success and failure. Ensure you are as prepared as possible to survive and thrive in any outcome by creating a strong plan to weather the types of changes we face in 2021.