7 minute read—Beginner|I Know Things|Expert CPA
Don’t rush to finish filing your business’s 2020 tax return—work with a licensed CPA to ensure that you’re saving as much as legally possible. Continue reading to learn about ways that your organization might be able to save and not overpay 2020 business taxes.
100% Bonus Depreciation
Thanks to the CARES Act, businesses can take a 100% depreciation deduction for guideline-meeting depreciable business assets used in commercial spaces, like machinery, computers, appliances, and more. Now that these costs can be fully deducted, businesses will no longer have to strategically disperse these kinds of costs over time.
To offset the inconvenience the previous law caused, this new development will allow businesses to take the 100% depreciation deduction on qualifying costs that have been incurred in the last three years and to apply them to whichever year is most favorable to them.
Families First Coronavirus Response Act (FFCRA)
As a result of the pandemic, many businesses provided sick or family leave to employees. If your business provided this to your employees, you may be eligible for tax credits for 100% of sick-leave pay, family-leave pay, qualified healthcare plan expenses, and the employer’s share of FICA taxes for sick-leave costs.
Employee Retention Credits
Businesses that were negatively impacted by the pandemic but were unable to get a forgivable loan from the Paycheck Protection Program might be able to claim employee retention credits. To qualify for these tax credits, your business’s gross receipts must have fallen by more than 50% in a quarter compared to the same quarter in 2019. The credit can be used for 50% of up to $10,000 in qualified wages per employee, or in other words, up to $5,000 per employee that your business maintained on payroll. If your business has more than 100 workers, there are limitations to these credits.
Economic Injury Disaster Loan (EIDL)
If your businesses benefited from an EIDL advance funding grant in 2020, you are not required to count the funds as taxable income. The Consolidation Appropriations Act established that EIDL Advances should not be reported as taxable income and that qualifying expenses covered with this money can be written off.
Charitable Gift Deductions
If your business qualifies as a C corporation, you can increase the deduction limit for donations to 25% this year only, up from the usual limit of 10%. The donation must have been a cash gift given to a qualifying organization during 2020.
Don’t overpay your 2020 business taxes! For help sorting out the deductions that your business might be able to take, contact Insogna CPA to make sure you are saving as much as legally possible on your taxes.