It’s safe to say that we’re all happy to move on from 2020 for so many reasons. But for everyone, especially for businesses, the new year means one last bit of business from last year: taxes.
Last year was among the most challenging that any business will ever face. Many smaller businesses didn’t make it. Many larger businesses are just barely surviving. If your business got through the gauntlet, then you should congratulate yourself, but it’s also likely you relied on some government programs to get by. If you did, then you should keep a few things in mind while preparing your taxes.
The confusion around the Paycheck Protection Program (PPP)
The PPP loans that helped prop up innumerable businesses and secure their expenses were subject to questions for a brief time. On the one side, congress had intended all along to potentially forgive these loans and allow business owners to deduct them from their taxes. However, rules from the IRS prohibited such actions.
Per the final relief bill signed at the end of 2020, the forgiven loans are deductible. However, confusion over the implementation of relief measures didn’t stop with the PPP.
Did you take advantage of the tax holiday?
As another measure of support for businesses and workers, the government allowed for a payroll tax holiday, meaning that you did not need to withhold Social Security for your employees. Employers didn’t all take advantage of this program as some considered the costs and confusion surrounding the holiday too onerous.
What you should know now is that those taxes were not forgiven and still must be paid. As an employer, it is your responsibility to make up the missed withholdings as soon as possible or face penalties.
Loans, bankruptcies and other measures
Aside from the government programs that we just discussed, companies took every step they could to get by. Some had to cut staff and other costs, and some filed for bankruptcy. Some took out even more loans. In a year filled with significant financial measures, it is important to consider what could happen if you ever face an audit.
Assured guidance on the last year from an experienced, skilled tax attorney will help you face the future with confidence and calm.