COVID-19 sent millions of small businesses into panic mode. No one could have seen this coming or done anything to prevent the damage that occurred. What’s important now is how you handle the crisis moving forward.
Small businesses still need to be proactive and aware of what’s needed in order to meet tax requirements even with the later filing date of July 15, 2020.
Here are 5 things you can do to make sure your business is ready.
1. Know your options.
Are you experiencing financial difficulties? There is still help out there. The SBA is a major resource for you right now. From the Economic Injury and Disaster Loan to other relief options the SBA offers, navigate what’s available to you.
Your city, county, or state may also offer assistance as every government entity is trying to keep as many businesses flourishing as possible. Ask around and get in touch with your SBA representative to learn more.
2. Take advantage of the employee retention credit.
The IRS is offering the EIC (Employee Retention Credit) through the end of 2020. The tax incentive offers up to $10,000 (50% of qualified wages) paid to employees if you had to stop operations or you lost more than 50% of your business due to COVID-19. The credit is per employee, but like anything does have its restrictions.
3. Take advantage of the tax breaks.
The new tax due date this year is July 15 for federal and most state taxes. Use the opportunity to make up for financial hiccups right now. There won’t be penalties for not paying your taxes until July 15. You also won’t pay penalties if you don’t make your estimated tax payments (for the self-employed) until July 15. The IRS made both 1st and 2nd quarter estimated payments due July 15 with no penalty.
4. Use the Paid Sick Leave Credit
Employees that can’t work due to coronavirus either having the illness themselves or being exposed are allowed up to 10 sick days paid. The Paid Sick Leave Credit pays employers for these sick days up to $511 per day for 10 days per employee. Employers may also receive the credit for employees that can’t work because they have to care for someone with COVID-19.
5. Keep careful documentation.
Now more than ever, you’ll need very detailed paperwork, especially if you’re claiming any of the credits from the IRS. Make sure your personal and business accounts are separated and keep detailed receipts for all expenses. Use a digital filing system to ensure you have all paperwork necessary should you undergo an audit, but also to prepare your taxes come July 15.
Small businesses face quite the interesting situation in the face of COVID-19. As the country starts to open back up, small businesses still have a long way to go before they’ll feel back to ‘normal.’ Keep yourself as organized as possible and take advantage of as many IRS credits as you can to help you get through this difficult time.