New York, Small businesses that have been buffeted by the pandemic, inflation and shipping woes have another challenge to add to their plate: taxes.
Tax season can be complicated for everyone, but as the April 18 filing deadline looms, small-business owners, contractors, entrepreneurs and others face a raft of ever-changing rules and regulations, AP reports.
Plus, many are dealing with delayed returns and refunds from prior tax periods. The Internal Revenue Service has warned of a backlog and says more delays are to be expected.
“It’s worse this year than last year,” said Gene Marks, owner of The Marks Group, a small business consulting firm in Bala Cynwyd, Pennsylvania. “It seems to get worse every year, and this year definitely worse than it’s been in prior years.”
The IRS said earlier this month it was hiring 10,000 workers to deal with a backlog of 23 million items triggered by limiting operations during the coronavirus pandemic. But with understaffing at both the federal and state government levels, CPAs have found it difficult to reach anyone if problems or questions arise.
“I’ve never seen this in my career, they’re all understaffed and all behind,” said Scott Orn, chief operating officer for the human resources and accounting startup Kruze Consulting.
But he urged companies to be patient with the IRS and state-level tax officials. The government programs provided during the pandemic, including the Paycheck Protection Program and Economic Injury Disaster Loans, helped countless small businesses.
“So many companies were saved, but that additional administrative burden was really rough on the IRS and state tax agencies,” Orn said. “The unintended consequences of good deeds have been tough to handle.”
Orn and other tax experts recommend filing for a tax extension this year, like most years.
“We file an extension for every single client, although they should pay estimated taxes throughout the year,” Orn said. “It gives us more time do the tax return properly. You just get way more leeway and there is not as much time pressure.”
There are other things to keep in mind too. It’s not too late to claim the employee-retention credit. The program, established in 2020 to help businesses during COVID, was subject to changing eligibility rules several times during the pandemic, so not all businesses realized they qualified. In its final form, the program offered a maximum $7,000 credit per employee, designed to encourage employers to keep workers on their payroll. The credit ended on Oct. 1, 2021, but businesses can still apply retroactively by filing an amended payroll tax return.
Also, many companies that struggled through 2020 actually had a better year in 2021 as the economy rebounded. That might affect the estimated tax payments companies pay throughout the year.
So companies should keep an eye on their cash flow and make sure they have enough on hand to make more tax payments, if necessary, to avoid penalties.
“This year, there will be some surprise profitability, with companies ending up with bigger tax bills than they thought,” Orn said. “That’s actually a good thing. The thing to worry about for small business owners is making sure they have the cash-flow support to estimated tax payments — it could surprise you.”
Finally, small businesses should keep in mind any money received via the Paycheck Protection Program or other COVID-related programs does not count toward gross income at the federal level.
Unlike other types of loans, PPP loans are tax-exempt whether or not they were forgiven. Businesses may have to report some information about the loan if it was forgiven and if they are deducting related expenses.
Source: Bahrain News Agency