6 Tax Changes Small and Mid-sized Businesses Should be Mindful of This Tax Season

Guest Post: Patrick Dichter, Appletree Business Services, appletreebusiness.com

Running a business is hard enough without adding in the complexity of filing taxes each year. Tax codes effecting businesses regularly change — 2021 was especially complex with the Payroll Protection Program (PPP), COVID Relief, Cares Act, and more.

With tax season upon us, we want to help you prepare your business. That’s why we’ve partnered with Appletree Business Services to help us break down some of the biggest changes small and mid-sized businesses should be mindful of when filing their 2021 returns.

  1. Net Operating Loss. You can deduct a net operating loss in your business for any of the five years prior to 2021 for a 100% offset of taxable income. For example, if your taxable income in 2021 is estimated at $50,000 and you had a net operating loss of $30,000 in 2020 - you may be eligible to offset $30,000 of taxable income for 2021.
  2. Employee Retention Credits. If your business had a partial shutdown or a decline in revenue of 20% or more versus the same period in 2019, and you retained employees, then you may receive a credit for wages between January 1 and September 30 of 2021. Credits can be worth 70% of the first wages paid to an employee per quarter up to $10,000 for the first three quarters of 2021. For example, if a daycare had a partial shutdown in 2021 and retained a teacher whose wages were $9000 in Q2, then 70% of those wages or $6300 would be an Employee Retention Credit.
  3. PPP Forgiveness. Round one of Payroll Protection Program (PPP) forgiveness was August 20, 2021. If you received PPP round 2, the deadline for filing for forgiveness is 10 months after the covered period. Once forgiveness is completed, it should not be recorded as income when filing 2021 taxes.
  4. 100% Expense Deduction for Meals. What was previously a 50% deduction will be a 100% deduction for 2021. Meals during business travel, company meetings, holiday parties, and client meetings are eligible. However, entertainment like club memberships and sporting events are not.
  5. COVID Relief Tax Credits for Paid Leave. If an employer paid wages for an employee on paid leave to get a COVID vaccine or related sick-leave due to COVID-19 between April to September 30, 2021, a deduction is eligible for up to 80 hours or $5,119; OR if an employee took paid leave to care for sick family members related to COVID-19, there is an eligible credit up to $12,000. However, both may not be claimed for the same period.
  6. Research and Experimental Expenditures. 2021 will be the last year for current expense method deductions of Research and Development (R&D) Tax Credits. Many companies aren’t fully benefiting from the R&D credits because of common misconceptions about its applicability to their operations. If your business had experimental or laboratory costs to develop or create certainty for a product, process or formula – check with your CPA because there may be a credit.

This publication is intended to provide general information. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter. Be sure to check the latest tax code at the Federal and state level and seek professional advice from your accountant or tax professional.

 

About Appletree Business Services

Appletree Business Services is a small accounting and bookkeeping firm offering a complete suite of small business services and support small businesses need most. Their proprietary payroll and bookkeeping software can help streamline payroll and take the worry off your shoulders, while their Quickbooks experts can help you get the most out of your software and resolve those nagging issues. Learn more about Appletree Business Services at appletreebusiness.com.

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