Small companies which were buffeted by the pandemic, inflation and delivery woes have one other problem so as to add to their plate: taxes.
Tax season could be difficult for everybody, however because the April 18 submitting deadline looms, small-business homeowners, contractors, entrepreneurs and others face a raft of ever-changing guidelines and rules.
Plus, many are coping with delayed returns and refunds from prior tax intervals. The Inside Income Service has warned of a backlog and says extra delays are to be anticipated.
“It’s worse this yr than final yr,” stated Gene Marks, proprietor of The Marks Group, a small enterprise consulting agency in Bala Cynwyd, Pennsylvania. “It appears to worsen yearly, and this yr undoubtedly worse than it’s been in prior years.”
The IRS stated earlier this month it was hiring 10,000 staff to cope with a backlog of 23 million gadgets triggered by limiting operations in the course of the coronavirus pandemic. However with understaffing at each the federal and state authorities ranges, CPAs have discovered it troublesome to succeed in anybody if issues or questions come up.
“I’ve by no means seen this in my profession, they’re all understaffed and all behind,” stated Scott Orn, chief working officer for the human sources and accounting startup Kruze Consulting.
However he urged firms to be affected person with the IRS and state-level tax officers. The federal government applications offered in the course of the pandemic, together with the Paycheck Safety Program and Financial Damage Catastrophe Loans, helped numerous small companies.
“So many firms have been saved, however that extra administrative burden was actually tough on the IRS and state tax businesses,” Orn stated. “The unintended penalties of fine deeds have been robust to deal with.”
Orn and different tax specialists suggest submitting for a tax extension this yr, like most years.
“We file an extension for each single consumer, though they need to pay estimated taxes all year long,” Orn stated. “It offers us extra time to do the tax return correctly. You simply get far more leeway and there’s not as a lot time stress.”
There are different issues to remember, too. It isn’t too late to assert the employee-retention credit score. This system, established in 2020 to assist companies throughout COVID, was topic to altering eligibility guidelines a number of occasions in the course of the pandemic, so not all companies realized they certified. In its last type, this system provided a most $7,000 credit score per worker, designed to encourage employers to maintain staff on their payroll. The credit score ended on October 1, 2021, however companies can nonetheless apply retroactively by submitting an amended payroll tax return.
Additionally, many firms that struggled via 2020 really had a greater yr in 2021 because the financial system rebounded. That may have an effect on the estimated tax funds firms pay all year long.
So firms ought to keep watch over their money movement and ensure they’ve sufficient available to make extra tax funds, if essential, to keep away from penalties.
“This yr, there will likely be some shock profitability, with firms ending up with greater tax payments than they thought,” Orn stated. “That’s really a great factor. The factor to fret about for small enterprise homeowners is ensuring they’ve the cash-flow help to estimated tax funds — it might shock you.”
Lastly, small companies ought to remember any cash acquired by way of the Paycheck Safety Program or different COVID-related applications doesn’t depend in the direction of gross earnings on the federal degree. Not like different varieties of loans, PPP loans are tax-exempt whether or not or not they have been forgiven. Companies might need to report some details about the mortgage if it was forgiven and if they’re deducting associated bills.