It seems the entire global population is ready to shut the door on 2020 and move forward. The year started with impeachment, moved on to COVID-19, and gathered steam with murder hornets and civil unrest. Like you, Bayou Bookkeeping and Tax Services is ready for a new chapter. But first, we and the clients we serve must deal with the tax implications of 2020. This article outlines the 2020 small business tax filing process for small business owners in Baton Rouge with an emphasis on the CARES Act and its implications.
If you are one of the more than five million businesses that took advantage of the Paycheck Protection Program (PPP) to stay afloat, you should understand the resulting tax implications. The CARES Act legislation passed in March 2020 was intended to provide relief from expenses, such as payroll, utilities, and mortgage interest. As a result, the small business administration provided forgivable loans. The legislation also clarified that the money would not be considered taxable income.
Many small business accounting firms speculated that businesses would still be able to deduct their expenses paid from the loan proceeds. Still, the IRS determined in May that such would not be the case. Instead, the IRS stipulated that expenses paid from PPP loans are ineligible to claim as deductions, typically significant deductions. If you accepted PPP funds, we encourage you to utilize a small business CPA or our tax filing service to ensure a proper income tax filing.
Businesses in Baton Rouge and surrounding areas that are ready to file business tax returns should gather all the necessary documentation and provide it to their accounting consultant or tax preparer. Here is a list of items to help get you started:
Did you take advantage of the payroll tax deferment allowed through the CARES Act? If so, you must pay half the amount owed by December 31, 2020, and the remaining half by December 31, 2022. Make sure you discuss this with your tax advisor when filing tax returns.
In addition to the complications that the CARES Act adds to your 2020 tax filing, the trial balance remains a recurring struggle for many small businesses. If your bookkeeping isn't accurate or up-to-date, you add significant time and money to the tax filing process. If you struggle for consistency and accuracy in this area, we encourage you to take advantage of our accounting and bookkeeping services.
At Bayou Bookkeeping, we understand the challenges that small businesses face. To that end, we offer monthly membership packages to meet your needs, ensure accurate budget projections, and maintain compliance. When you want to prepare your tax returns or make budget projections, we can assist. If you own a small business in Louisiana, give us a call at (225) 442-1137 or request a consultation to learn how we can help you file your 2020 taxes. We can help with your individual return, too.
Sources:
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program
Colvin, Geoff. "The IRS effectively canceled the tax break that made PPP loans so valuable." Web Blog Post. Fortune, 7 December 2020. 8 December 2020.
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