Taxes are an annual headache for most business owners. Other than during tax season, they reason, is there any point to thinking about them during the rest of year? Actually, there is good reason to have taxes on your mind on a year-round basis.
As a business owner, you’re responsible not just for knowing which taxes to pay, but for adhering to the schedule required by the federal and state government to pay taxes on business activities. Sole proprietors, S-corporations, LLCs—all business structures are required to file and pay the appropriate taxes.
Let’s begin by understanding changes in business taxes for 2020-2021 and then look at how you can use your ERP software to prepare for tax season all year long.
No Surprises in Business Tax Code for 2021
First, the good news: there are no major changes to the tax code this year. However, the CARES Act and similar legislation enacted to assist businesses during the coronavirus pandemic may impact your taxes.
- Money received by a business as part of the Paycheck Protection Act may or may not be taxable depending on how it was used. Funds received and used for payroll, mortgage, or utility payments may be considered a forgivable loan, and thus not taxed. But funds received and used for general business expenses and paid for by the loan may be deductible.
- Economic Injury Disaster Loans (EIDL) were enacted to help businesses negatively affected by the mandatory shutdowns. Businesses that received this loan are required to pay taxes on it.
- Families First Coronavirus Response Act (FFCRA) required some businesses to provide sick or family leave to employees impacted by COVID-19. If your business made these payments, it is eligible for tax credits for 100% of the cost of sick leave and family leave pay and qualified healthcare plan expenses.
There are many more temporary changes brought about by the coronavirus pandemic. While not long-term changes, they must be properly accounted for and reported.
Tax Planning a Year-Round Project
As you meet with your accountant or work on your business taxes for 2020-2021, consider the impact that taxes make on your business. Planning for business taxes isn’t just a once-a-year thing but should be a consideration all year long.
Your company’s ERP software can be used to help you prepare for business tax filing. Tracking loans by source, for example, can help you distinguish between taxable loans and subsidies that aren’t taxed.
Similarly, planning for taxes ensures you don’t overpay. Getting a refund may seem like a good thing but it’s not in your company’s best interests. A refund means you overpaid, and an overpayment is money tied up with the government that could have been put to better use in your business.
Acumatica Cloud ERP Software Makes Tax Filing Easier
There may not be a way to make tax filing pleasant. Acumatica Cloud ERP helps you stay on top of your daily financial operations. Generating quarterly and annual reports is easy, which makes filing your business taxes run much more smoothly. To learn more, contact ASI.