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Small Business Tax Provisions

What are the changes to tax filing for businesses?

The income tax return due date for calendar year corporations has been extended to July 15. Tax returns and any income taxes owed will not be due until July 15. Employers can defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Deferral is not provided to employers that avail themselves of SBA loans designated for payroll.

What tax relief support is there for small businesses and private non-profit organizations?

Refundable tax credits are available for private-sector employers that are required to offer coronavirus related paid leave to employees. IRS will be posting information soon on these credits on its website (www.irs.gov), including information on how to obtain advance payment of these credits.

The employer side of certain payroll taxes are deferred through the end of 2020. Deferred taxes will not become due until end of 2021 and end of 2022, with 50% of the liability being paid at each date. Any business that does not have a loan forgiven under the new SBA Paycheck Protection Program is eligible for the payroll tax deferral.

Small business owners and non-profit directors should look out for information at www.irs.gov and talk to their payroll service provider, as applicable.

What type of assistance will independent contractors be eligible for? 

Refundable tax credits are available for independent contractors who would have qualified for coronavirus related paid leave if they were employees. IRS will be posting information soon on these credits on its website (www.irs.gov), including information on how to claim these credits.

50% of certain self-employment taxes are deferred through the end of 2020. Deferred taxes will not become due until end of 2021 and end of 2022, with 50% of the liability being paid at each date. 

Independent contractors are also eligible for assistance through the Small Business Administration’s new Paycheck Protection Program and Economic Injury Disaster Loan Emergency Advance Program.

Employee Retention Credit for Employers Subject to Closure or Experiencing Economic Hardship

An employee retention tax credit is available for struggling businesses that are not eligible or choose not to participate in the new SBA Paycheck Protection Program. This provision would provide a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis. 

Eligible businesses are eligible for a 50% credit for wages paid to furloughed or reduced-hour employees. For businesses with 100 employees or less, the credit is based on all wages paid,

regardless of whether an employee is furloughed. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in wages and compensation paid by the employer to an eligible employee. Wages do not include those taken into account for purposes of the payroll credits for required paid sick leave or required paid family leave, nor for wages taken into account for the employer credit for paid family and medical leave (IRC sec. 45S).  The credit can be claimed against the business’s quarterly payroll tax liability and is fully refundable to the extent of excess. There will also be options to receive advance payments. The credit is not available to employers receiving assistance through the Paycheck Protection Program. The credit is provided through December 31, 2020. 

Delay of Payment of Employer Payroll Taxes

This provision would allow taxpayers to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Payroll taxes that can be deferred include the employer portion of FICA taxes, the employer and employee representative portion of Railroad Retirement taxes (that are attributable to the employer FICA rate), and half of SECA tax liability. Deferral is not provided to employers receiving assistance through the Paycheck Protection Program

Consult your tax preparer, payroll manager and SBDC small business advisor and look for forthcoming updates on www.irs.gov for further direction on how to claim your business tax credits.

 

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