Many business owners are struggling because of COVID-19 shutdowns and restrictions. Recognizing this, Congress and President Trump passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Act provided financial assistance for American workers and companies, but that assistance only goes so far. For additional relief, companies might explore tax breaks for small businesses to see if any apply to their own situation. We will look at four of these potential pandemic-related tax breaks in this article. However, your tax professionals can provide in-depth advice on tax issues.
#1. Employee Retention Credit
This credit is 50% of qualifying wages but is capped at $10,000 in total. Qualifying wages can include part of the health care provided by the employer.
The following criteria apply for companies seeking to use the employee retention credit.
- “The employer is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
- The employer’s gross receipts are below 50% of the comparable quarter in 2019.”
Employers may no longer qualify for a calendar quarter if gross receipts exceeded 80% of a comparable quarter in 2019.
Other tax breaks for small businesses relate to delaying, but not necessarily eliminating, taxes due.
#2. Deferring Social Security Taxes
The CARES Act also provides businesses the opportunity to defer 6.2% of their part of the Social Security tax component of FICA tax owed. This tax break only applies to the first $137,700 of an employee’s 2020 wages paid during the deferral period, with the deferral period being March 27, 2020, to December 31, 2020.
At this time, it appears that the deferred tax will be paid in two installments due on December 31, 2021, and December 31, 2022.
Self-employed people may also use this deferral when looking for tax breaks for small businesses.
However, business owners should be aware that this tax break is not available if they received the forgiveness of loans provided through the Paycheck Protection Program (PPP). It’s best to carefully weigh which tax break is best for your small business.
#3. Paid Sick Leave Credit
On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “FFCRA”). Among other things, the FFCRA gives eligible small and midsize employers refundable tax credits for small businesses. The credit reimburses employers for 100% of the cost of providing sick and family leave wages to employees who must be off work because of COVID-19.
Companies generally must have fewer than 500 employees.
Employees may get up to 80 hours of paid sick leave to care for themselves of others.
#4. Family Leave Credit
The FFCRA also provides a credit for workers who need to take a coronavirus-related leave. For example, workers may receive up to 10 more weeks of paid family leave because:
- their child’s school is closed,
- their childcare provider is closed or unavailable because of COVID-19 precautions.
Business owners should carefully consider the long-term effects of tax credits before accepting them.
Learn More About Tax Breaks for Small Businesses
We encourage you to contact your tax professional for advice about tax-related issues.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.