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
Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?
This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.
Could waiving patents increase the global supply of COVID-19 vaccines?
India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.
Donate now to get almost any thank-you gift.