Beyond the SBA’s disaster loans and its Paycheck Protection Program as part of the CARES Act package, there are also a number of less publicized tax changes and programs that small businesses can benefit from in the legislation.
Owners will need to determine which make the most sense for their business and decide what would have the largest effect — business owners should consult with their tax advisor.
Items Beyond SBA Lending To Consider:
1. Refundable Payroll Tax Credit
Businesses can claim a 50 percent refundable tax credit on up to $10,000 in wages paid during the crisis. This means a business can receive $5,000 per employee if the business was disrupted due to the pandemic — as long as the business saw a decrease in gross receipts by 50 percent or more from the same time last year.
This credit is also available for those that employ more than 100 and kept those employees on their payroll even if they're not currently working.
There is a stipulation, If you use the SBA’s Paycheck Protection Program, you can’t use this credit.
2. Delayed Social Security Payroll Tax Payments
This allows businesses to delay paying Social Security payroll taxes until the end of the year. If a business decides to do this, it must pay half of the delayed taxes at the end of 2021, and then the other half at the end of 2022.
3. Net Operating Loss Tax Change
Businesses that lost money in 2018, 2019 or 2020 can take the calculated losses for each of those years and carry them back, up to five years to reduce their taxable income in a previous year. A business would amend their tax returns for that year and get a refund check sent from the IRS.
The CARES Act also suspends a previous rule that limited the amount of net operating losses businesses can offset to 80 percent of taxable income. It now allows businesses to apply losses to the entiretaxable income of a previous year.
4. Net interest Deduction Limitation
The Act raises the limit on the amount of loan interest businesses can deduct on their tax returns. Rising to 50% from 30 percent of earnings before interest, tax, depreciation and amortization. This can provide relief to businesses that have needed to take on more debt during the crisis.
Small Business Development Centers Congress made $275 million available in grants to Small Business Development Centers, Women’s Business Centers and Minority Business Development Agency’s Business Centers to hire staff and bulk up resources to provide mentorship, guidance and expertise to small, women-owned and minority-owned businesses and help them manage their way through the pandemic. Locally the UAlbany Small Business Development Center is offering one on one online sessions and phone sessions during this time as well as many group webinars. Find SBDC support here,contact the SBDC for guidance on both the Paycheck Protection Program and the SBA’s Economic Injury Disaster loans. Go to the Support smAlbany Business Resources page as well for additional resources.