What to know about business taxes this year

Business owners can expect some new twists in filing their taxes this year, thanks to the government’s introduction in 2020 of several new tax credits and loan programs designed to aid businesses and boost the economy during the pandemic.

Work with your accountant to make sure you consider these pandemic-related relief programs as you prepare your taxes.

Paycheck Protection Program. The government’s Paycheck Protection Program (PPP) provided forgivable loans to help businesses weather the pandemic. A PPP loan that was fully forgiven is not considered taxable income for 2020, though any amount that was not forgiven is taxable business income.

Economic Injury Disaster Loan. The U.S. Small Business Administration (SBA) expanded the EIDL program during the pandemic. A business that received EIDL funding is still required to pay income taxes on this loan.

Employee Retention Tax Credit. Qualifying businesses were able to use this credit to retain employees during the pandemic. Businesses that qualified are eligible for a tax credit equal to 50% of qualifying wages, up to $10,000 per employee between March 13, 2020, and Jan. 1, 2021.

Families First Coronavirus Response Act. This act required certain businesses to provide sick/family leave to employees who were affected by COVID-19. Businesses that made these payments are eligible for tax credits.

Increases in business interest expense deduction. The allowable business interest expense deduction was increased for some businesses from 30% to 50% of adjusted taxable income.

 

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