Small businesses that have been rocked by the pandemic, inflation, and shipping issues have another challenge to add to their plate: taxes.
Tax season can be tough for everyone, but as the April 18 filing deadline approaches, small business owners, contractors, contractors and others are faced with a slew of rules and regulations. constantly evolving.
Additionally, many are facing return delays and refunds from prior tax periods. The Internal Revenue Service has warned of a backlog and says further delays are to be expected.
“It’s worse this year than last year,” said Gene Marks, owner of The Marks Group, a small consulting firm in Bala Cynwyd, Pennsylvania. “It seems to get worse every year, and this year is definitely worse than previous years.”
The IRS said earlier this month it was hiring 10,000 workers to deal with a backlog of 23 million items triggered by the curb on operations during the coronavirus pandemic. But with a staff shortage at the federal and state levels, CPAs find it difficult to reach anyone with a problem or question.
“I’ve never seen this in my career, they’re all understaffed and all behind,” said Scott Orn, chief operating officer of human resources and accounting startup Kruze Consulting.
But he urged businesses to be patient with the IRS and state-level tax authorities. Government programs introduced during the pandemic, including the Paycheck Protection Program and Economic Disaster Loans, have helped countless small businesses.
“So many businesses were saved, but this added administrative burden was really difficult for the IRS and state tax agencies,” Orn said. “The unintended consequences of good deeds have been difficult to deal with.”
Orn and other tax experts recommend filing for a tax extension this year, like most years.
“We file an extension for each client, although they have to pay estimated taxes throughout the year,” Orn said. “It gives us more time to do the tax return correctly. You just have a lot more leeway and there’s not as much time pressure.
There are also other things to keep in mind. It’s not too late to claim the retention credit. The program, created in 2020 to help businesses during COVID, was subject to several changes to eligibility rules during the pandemic, so not all businesses realized they were eligible. In its final form, the program offered a maximum credit of $7,000 per employee, designed to encourage employers to keep workers on their payroll. The credit ended on October 1, 2021, but businesses can still apply retroactively by filing an amended payroll tax return.
Additionally, many companies that struggled throughout 2020 actually had a better year in 2021 as the economy rebounded. This could affect the estimated tax payments that businesses pay throughout the year.
Companies should therefore monitor their cash flow and ensure that they have enough money to pay more taxes, if necessary, in order to avoid penalties.
“This year there will be surprise profitability, with companies ending up with bigger tax bills than they thought,” Orn said. “It’s actually a good thing. The thing small business owners need to worry about is making sure they have cash flow support for estimated tax payments – it might surprise you.
Finally, small businesses should keep in mind that any money received through the Paycheck Protection Program or other COVID-related programs does not count toward gross income at the federal level. Unlike other types of loans, PPP loans are tax exempt whether or not they have been forgiven. Businesses may have to report certain information about the loan if it has been canceled and whether they are deducting related expenses.