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CARES Act Tax Breaks?

Written by Jacob Merkley on July 1, 2020

The Cares Act: What does it mean for you?

The CARES Act. Wow…the business landscape has changed.

With the passing of the Coronavirus Aid, Relief, and Economic Security (CARES) act, things are different for business owners during a time of unusual economic crisis.

Additional Resource: What COVID-19 Means for Your 941 Payroll Tax Debt

As a construction or trade contractor, are you familiar with all of the tax breaks that the CARES act provides?

YouTube Channel: Construction & Trade Contractor Tax Talk

If not, let’s review together to make sure that you and your business are able to make the most of them during this time in the world.

These tax breaks are anything but “fun” to talk about, but they are highly important. They might even make or break your business and allow you the ability to continue on as a business owner.

  1. Charitable Gifts from Corporations
  2. Defer Payroll Taxes
  3. Payroll Tax Credit – $5,000 Per Employee
  4. Net Operating Loss Carryback

Charitable Gifts from Corporations

Charitable gifts from corporations are usually limited to 10% and any amount over that 10% threshold should be carried forward into a different year. However, for 2020, that limit has been raised to 25% for cash gifts. In addition, the government has also raised the limit for foodstuffs from 15% to 25%

Defer Payroll Taxes

Another big break for companies is the allowance to defer payroll taxes incurred after March 27th and before January 1, 2021 for up to two years. Half of the total amount deferred will be due on December 31st 2021, with the rest due at the close of 2022.

At first glance, this might not seem like a big deal. The Payroll Tax is only 6.2%, but since it also applies to those of you that are self-employed… its great news.

Everything is constantly moving, and the WTA team is still digging into this because there are some strings attached to this rule. But its definitely work keeping in mind!

Payroll Tax Credit – $5,000 Per Employee

Staying inside the payroll realm, there is an additional credit available. You can claim a $5,000 per employee credit if the business:

  • Stays open during the crisis
  • Is forced to close due to a government order
  • Lost up to 50% of its revenues
  • And a few other variables (again, we are all trying to wrap our arms around this!)

Net Operating Loss Carryback!

One particularly nice CARES Act addition is the reappearance of the Net Operating Loss Carryback. This benefit was killed off several years ago. This carryback rule allows a company with a Net Operating Loss to carry that loss forward for up to 20 years.

The idea behind this reappearance is the many businesses are going to need to rebuild in the wake of the economic trauma they have been there. We have all been through a lot, and this reappearing rule will give businesses a chance to rebuild.

Speaking about business losses, the CARES Act also reinstated the deduction for business losses on individual returns which is another huge benefit. That was a victim of the 2018 tax law that went into effect, but is now once again at play.

Conclusion

Here’s the bottom line… the CARES Act provides a lot of information and changes. Much of it can really help companies impacted by the Coronavirus if they know how to use it. Bu the sheer volume of the CARES Act (it’s a whopping 800 pages!) means that some things may still need to be defined and clarified. As the recovery continues to unfold, many business and entrepreneurial clients of ours will be able to use these breaks to help rebuild their business.

Will you?

Additional Resources

Like I mentioned above, the CARES Act is a whopping 800 pages. Our team is trying to dissect this Act like the next person. Here are a few additional resources that I have been reading, in case you’d like to do some additional research:

LEARN MORE

Filing and Deposit Dates

Important Filing and Deposit Dates You Cannot Forget      

Your Business Future

Take Action – A Simple Step to Change the Future 

Trust Fund Recovery Penalty

Everything You Need to Know about the TFRP (The Big Whammy) 

Tackle Your Payroll Tax Debt

Proven Strategies Every Sub-Contractor Business Owner Should Know While Dealing With the IRS.

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