Keep Pandemic Tax Breaks in Mind

Small businesses shouldn’t overlook special tax breaks related to the pandemic.

August 26, 2020

WASHINGTON—Some small businesses are struggling, while others are experiencing a boom in sales. Regardless of what category they fall into, neither should overlook special pandemic tax breaks, the Wall Street Journal reports. There are other provisions (some new, some not) beyond the Paycheck Protection Program and payroll tax deferrals that can benefit small-business owners.

“Tax strategies aren’t top of mind during a crisis, but they make a difference. Some of them provide cash that many owners need,” said attorney Bill Smith, head of CBIZ MHM’s national tax office.

For example, small businesses can claim 2020 losses on 2019 tax returns or on 2020 tax returns under the federal disaster provision. While usually that means natural disasters like earthquakes or hurricanes, this year, the pandemic is included. Not every pandemic loss will qualify, but a good rule of thumb would be to claim a loss if the loss is both sudden and triggered by the disaster.

Unfortunately, the IRS has yet to issue guidance on pandemic disaster losses, although a spokesperson did acknowledge the agency’s awareness of the concerns. Businesses can also carry 2020 losses up to five years; the provision can be used by corporations and owners of pass-through entities.

Another suggestion would be to change to cash accounting to defer tax payments. Businesses averaging under a certain revenue amount can use cash accounting rather than accrual accounting over three years. “This means they won’t owe the IRS until customers pay, rather than owing when the customers commit to pay,” the Journal wrote.

Coronavirus Resources

NACS has compiled resources to help the convenience retail community navigate the COVID-19 crisis. For news updates and guidance, visit our coronavirus resources page.