Ways to Maximize your Tax Benefits During Covid-19

Tax

The Covid-19 pandemic has taken the world by a storm. It’s global economic and financial impact is being felt presently, and is estimated to stretch in its effect in the future as well. While the pandemic continues to expand, the IRS is taking sweeping measures to safeguard people and their businesses. The Internal Revenue Services is extending programs with the three principles of working together with people, focused largely on their well being and helping each other and the less fortunate. 

With the entire fiasco overlapping with the tax deadlines and important year-end dates, the IRS has taken various measures to ease the period. Here are some tax benefits and strategies you can avail of during the Covid-19 lockdown. The proper usage of which can help your business sail through with minimum effect during this period.

The Four R’s to Safeguard Your Business During Covid-19:

Before you plan your taxes, here is your holy grail to strategize your business logistics today, and make your business Covid-19 secure!

Resolution: The first is to address the problems that your business and workforce are facing immediately due to the virus. Be it, in terms of technology, safety, and your clients.

Resilience: Address the cash management issues that can be faced by the business in the long-term. Preparing right from the start can help you in these times of uncertainty. 

Returning: Already start charting a plan of action for your business for the time when it returns to normalcy. 

Reimagination: While charting a policy of return, reimagine what the new normal would be. When you apply the idea of what the future can be, you will be able to make better plans and strategies to get you and your business back on track.

Tax Benefits to Avail During Covid-19:

Economic Impact Payments: These are the payments that the IRS is automatically distributing to people within a definite income range. In most cases, there are no actions required by the people in return for the same. Following are the requirements for the Economic Impact Payments:

• If you are a tax paying individual with a gross income of $ 75,000 or a married couple jointly filing taxes with a gross income of $ 150,000; you are eligible to get the entire amount of the economic impact payments. 
• This amount is automatically distributed by the IRS on the basis of the tax returns that have been filed either in 2019 or 2018. (Click here for more information)

Employee Retention Credit: With the pandemic raging, the government is urging to retain employer strength, so as to minimize the lay-offs. In the same direction, the IRS has proposed to extend Employee Retention Credit. This is a refundable tax credit of upto 50% for wages paid upto $10,000, for businesses impacted by COVID-19. 

• Wages paid after March 12, 2020 to January 1, 2021 will be eligible for the Employee Retention Credit.
• If the employees are less than 100, then whether they are working or non-working, the ERC, will apply for wages upto $10,000.
• If the employees are more than 100, then the ERC will apply only to the working employees with wages upto $10,000. (Click here for more information)
  
  

People First Initiative: IRS is trying to be a part of the solution by being in these times together with people and businesses. From extending the tax deadlines to adjusting the consequent compliance actions. The projected start date for the extensions will start from April 1 and will work on till July 15.

• All the installments due to be paid between April 1 to July 15 are suspended. (If preferred so by the individuals.)
• However, the interest on the due amount will still continue to be the same.
• The IRS is also reminding people who have not filed their tax returns for the last three years. As there are cases where they are owed refunds and adjustments. Doing so at this time will help them furthermore.
• Overtaking of personal properties and residences in the wake of liens and levies will also be suspended during this period.
• In the case of high-income individuals, the activities and proceedings will be undertaken as usual.
• In the wake of private debt collection, no fresh delinquent files will be extended for private collection during this period. (Click here for more information)

July 15 is the new tax day: All the treasury and IRS tax penalties and deadlines have been extended to this date. Even the income tax payments can be deferred to 15 July to 15 April without any penalties, if preferred so by the taxpayers.

Employer Payments for Providing Leaves: The IRS has made it necessary to provide 80 hours of paid sick leave and childcare leave. As a benefit of which, the employers who extend such payments can save the amount paid on their eventual payroll taxes. This way, there can be a true balance and equal benefit to both the employees and the employers.

Get Ahead of Covid-19:

It is important to stay home, stay safe and fight the virus. It is also important to take the same care of your financial health during these testing times. With the correct business strategies and by availing the plethora of benefits being extended by the IRS, you can greatly benefit.

The various tax relaxations, employer-centric tax refunds and the financial benefits that have been carefully calculated and meticulously extended by the IRS are going to help your business in these times of adversity. 

Watch this space for more accounting tips, tricks and expert insights into how you can ace the tax season in the times of Covid-19.