Anthony, Here Are Your Articles for Wednesday, November 18, 2020
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5 Business Tax Deductions to Consider

 

What can business owners do to reduce their taxes? Some need to make themselves aware of the various breaks available. Some of the benefits available to businesses for 2020 are the result of the 2017 Tax Cuts and Jobs Act (TCJA) and some were created by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). In addition, although the chance of any further tax or Covid-19 legislation seems slim, further changes may come.

In the meantime, consider the following five tips:

1. Accelerated Alternative Minimum Tax (AMT) Refunds. The TCJA repealed the corporate AMT. It also allowed corporations to claim any unused AMT credits in tax years 2018–2021. The CARES Act accelerated this timeline. Accordingly, companies that file by December 31, 2020, can claim all remaining tax credits for 2018 and 2019.

2. Disaster Losses. The entire country was declared a disaster area because of the Covid-19 pandemic. This makes businesses eligible to fast track a refund for certain Covid-19-related losses. The losses must have occurred in 2020. The claim for a refund may be available if the business files a 2019 amended return.

3. Payroll Tax Deduction. Companies that elected to defer paying their 6.2% share of payroll taxes for 2020 are allowed to defer repaying this amount according to the following schedule: Half of the deferred amount must be repaid by December 31, 2021, and the remaining half by must be paid by December 31, 2022. This can help companies with their cash flow, however, the tax cannot be deducted if it is not paid. Consequently, with some exceptions, companies that defer paying payroll taxes in 2020 cannot take the deduction in that year.

4. Net Operating Loss (NOL) Carrybacks. The CARES Act allows businesses to use current losses against past income for immediate refunds. As a result, NOLs arising in tax years beginning in 2018, 2019 and 2020 can be carried back five years for refunds against prior taxes. These deductions come some restrictions, however, including when 2020 taxes are filed.

5. Bonus Depreciation. The CARES Act expanded the bonus depreciation deduction to apply to improvements to qualified improvement property dating from January 1, 2018.

These are summaries of what often are a series of complicated regulations. Companies must meet specific criteria for any of these strategies to apply. You should work with a financial professional and do not automatically assume that you do, or do not, qualify for any of these provisions. Also, last-minute regulatory or legislative changes may add to or modify these provisions. For additional help deciphering these regulations, contact us today.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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