Small businesses still struggling with COVID impacts must consider tax implications, too
Share Now on:
The new relief package includes several forms of aid for small businesses, including a new Paycheck Protection Program. The round of aid will also let business owners claim tax deductions on payroll and other expenses their PPP money paid for.
Small business advocates have welcomed the change, but business owners still face a lot of uncertainty when it comes to their tax bills.
Before the new relief package was signed into law, New York City cocktail bar owner Ashwin Deshmukh just wasn’t sure when he should apply for forgiveness on his PPP loan, and how that would impact his tax bill.
“Should we even wait to do the forgiveness application until next year? It’s just a waiting game,” he said.
The new round of relief will let business owners deduct expenses that their PPP money paid for. But the IRS hasn’t yet provided guidance on how exactly the new relief package will affect a business owner’s overall tax liability.
“It’s like a whole new ball game for us, so we’re kind of just grasping,” said Nicole Davis, owner and CEO of the Georgia-based firm Butler-Davis Tax & Accounting.
She said she normally fields a lot of tax questions at this time of year. But this year, small business owners are especially anxious about their taxes, their outstanding debt and whether they should apply for the new round of PPP money.
“There are clients that are reaching out to us on a weekly basis trying to get advice and guidance on how they should navigate their next week of cash flow,” Davis said.
And business owners need clarity soon, said Karen Kerrigan, president of the Small Business & Entrepreneurship Council.
“Because they just don’t know how much capital they need to hold on to versus what they can continue to put into their business to compete and grow,” she said.
Kerrigan said either way, small businesses that receive aid should be keeping good records. The IRS has indicated it could ramp up audits in 2021.
COVID-19 Economy FAQs
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.