COVID-19 Loans and Tax Credits Granted for a Complex Tax Year in 2020
As if dealing with COVID-19 wasn’t enough, Michigan business owners must be prepared for a complex tax year ahead.
At Maner Costerisan, we anticipate that many Michigan business owners will be asking for extra time to file their taxes this season due to the complexity.
In a recent ruling, the Internal Revenue Service extended the deadline for filing income tax returns until May 17. Even with the extra time, businesses need to start preparing for upcoming tax deadlines.
The $ 2.2 trillion CARES Act rolled out a series of relief measures for Americans, including helping small businesses in the form of loans, tax credits, and more. Since these relief measures revolve around the tax code, entrepreneurs should ensure that they are fully prepared for the 2020 tax year.
The more than 121,000 Michigan businesses and nonprofits that received forgivable loans through the Paycheck Protection Program this spring will have the toughest returns. Additional guidance in the Consolidated Appropriation Act addressed some issues – including the ability to deduct expenses covered by a canceled PPP loan – however, many unresolved issues remain for business owners, with solutions highly dependent on the circumstances. unique to each company.
Another important factor for Michigan businesses will be determining whether customers are eligible for Employee Retention Credit (ERC). The CARES Act added the ERC, a refundable payroll tax credit equal to 50% of a maximum of $ 10,000 of eligible wages per employee for 2020 and up to 70% of a maximum of 10 $ 000 of qualifying salary per quarter in 2021. But under the CARES Act, companies with a PPP loan were not eligible for CER.
The 2021 Consolidated Appropriation Act makes the ERC available until credit is claimed for salaries paid with the proceeds of a PPP loan that has been canceled. The change in what is allowed was not just for 2021, but retroactively effective for 2020.
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Finally, the US $ 1.9 trillion bailout is the latest law on track to impact business. The bill, signed by President Biden, allocates federal funding to a myriad of programs – including $ 15 billion to the disaster emergency loan program, $ 25 billion to fund a new grant program specifically allocated to bars and restaurants and an additional $ 7.25 billion for the paycheck protection program. . Extended unemployment benefits, child care tax credits and individual payments are all included in the new pandemic relief program.
We encourage business owners to work even more closely with their business and their trusted tax advisors this year to ensure they are up to date with the ever-evolving COVID-19 tax changes and are up to date. of all the funding available during these difficult times.
Trey Williams is the president of Maner Costerisan in Lansing.