Category: Tax File

How Will Your 2020 Business Taxes be Impacted by PPP Loans

Small Business Taxes

Small business owners across the country had high levels of uncertainty about their business’s future when the coronavirus pandemic began. Luckily, the CARES Act provided some small business financing options, which included the Paycheck Protection Program (PPP). With potentially 100% of the loan qualifying for PPP loan forgiveness, unlike EIDL loans, many business owners took advantage of it to save their company. The PPP also offers the benefit of deferring 50% of its 2020 payroll taxes to 2021. If you took advantage of the COVID relief offered by the Paycheck Protection Program, here’s what you need to know about how your 2020 business taxes will be impacted.

Funds From PPP Loans Won’t Be Taxed

The good news for small business owners is they won’t have to pay any PPP taxes since the money will not be considered taxable income. However, to avoid any potential issues or complications, it’s important to be conscious about only using the PPP funds on qualifying business expenses like rent, payroll, mortgage interest, and other approved expenses. So you won’t have to worry about paying significant small business taxes on PPP funds if you use them how they are intended.

Tax Deductions Can’t Be Applied If PPP Funds Are Used For Expenses

Some of the best small business tax help comes in the form of tax deductions claimed. Small business owners get tax breaks when paying rent, mortgage interest, utility bills, payroll taxes, and many other business expenses. However, as a trade-off for not having to pay income tax on your PPP loan, you can’t deduct those items as you normally would if you used PPP funds to pay for them. Even if you decide to defer 50% of your payroll taxes to 2021 as is allowed in the PPP, you still won’t be able to deduct that portion.

Always Stay Informed On PPP Policy Changes

One of the biggest reasons why the Paycheck Protection Program was so successful is because of the PPP loan forgiveness. On the other side, a significant downfall is not being able to take advantage of tax deductions you’re used to taking annually. There’s no doubt the PPP saved thousands of small businesses, so depending on how the next several months go, changes to the PPP are possible. Always stay informed on any policy changes, including whether tax deductions become possible in the future, so that you can take advantage of any benefits for your small business.

Tax Resource Group is here to help small business owners make sense of the Paycheck Protection Program, so there are no immediate or future surprises. This has been an unprecedented year with many changes no one expected, and we can help you walk through them all, so you come out with the best tax situation possible. If you have any questions or concerns about your small business taxes, don’t hesitate to contact us at any time to schedule an appointment with one of our professionals.

3 Tips for a Quick and Easy Tax File

3 Tips for a Quick and Easy Tax File

It always seems like tax day sneaks up on us quickly. With the busy lives we all have, it’s tough to find the time to dedicate to prepare and file our tax returns. Filing taxes is a necessary part of life, though, and there are some tips and strategies to help get your tax refund in your bank account quicker. Follow these tips and your tax preparation and filing will be seamless, quick and easy.

Gather And Organize All Documents

Before you make an appointment with a tax professional or tax preparer, gather and organize your documents the best you can. These documents include any 1099 forms, W-2s, mortgage interest statements, expense records, property tax documents, real estate documents, tuition statements and more. Also, include any medical expenses and charitable contributions that could help your tax refund. If you’re unsure whether a particular document can be filed with your tax return, bring it into your tax appointment and mark it as questionable so the preparer knows what to look for. It can be difficult to go off of memory when it comes to the required documents, so you can always look at your tax return from the previous year as a starting point.

Identify Any Credits And Deductions

Another reason why it’s valuable to look at your previous year’s tax return is so you can compare last year to this year. If you got married, had a child, started taking care of a loved one, bought a house or experienced other life-changing events, you may be eligible for a tax credit or deduction. Child care costs may also give your tax refund a boost, so don’t forget those. Tax credits and deductions vary among households and individual situations, especially if someone is self-employed. Gather the documents you know for sure are deductible and ask your tax professional or preparer about any questionable ones.

File Your Tax Return Electronically

Nowadays most people file their tax return electronically because it’s quicker, easier, more accurate and provides an electronic receipt instantly so you know your return has been filed. This is particularly a good strategy if you tend to wait until the deadline to file your taxes. It’s still valuable to bring your documents into a tax preparer, where you can have peace of mind knowing you have everything in order. Plus, you can look at a tax estimator so there are no surprises as to what you owe or what amount your tax refund will be.

Rocket Tax Relief wants to help make filing your tax returns as easy and seamless as possible. We are a full-service tax company offering tax relief, tax preparation and even audit representation. We understand everyone has busy lives and may not know exactly how to prepare taxes in the best manner possible. When you contact us to schedule an appointment, we will help you identify the documents you need to make the entire process quick so you can get your tax refund and move forward with your life.