By: Jessica A. Distel, CPA, MBA - Director of Business Services
In 2022, as we continue to navigate through our new norm brought on by Covid-19, we strive to help our small business owners stay abreast of the never-ending changes. Heading into this tax season, the IRS is buried under tens of millions of unprocessed tax returns and pieces of correspondence, so we strongly encourage our clients to electronically file returns in 2022 whenever possible to help expedite processing. It is next to impossible to call the IRS and speak with an agent currently. We know it is frustrating for those taxpayers that are still waiting on their tax returns to finish processing, refunds to be received, and receipt of responses to correspondence from last year.
Many small businesses were eligible for the second draw of the Paycheck Protection Program Loans (PPP2) in early 2021. As a friendly reminder, if your small business received a PPP2 in 2021, the deadline to file for forgiveness is 10 months after the end of your covered period. The covered period starts the day your loan was funded and ends after 24 weeks or 168 days. The size of the loan and the business’ specific facts and circumstances will determine which forgiveness application form will need to be remitted to the bank. Lastly, the PPP2 forgiveness or anticipated forgiveness will need to be specifically reported on the 2021 federal tax return.
The Employee Retention Tax Credit (ERTC) is also something that small business owners should be aware of. In 2021, many businesses were eligible for the ERTC if they met one of two criteria:
1) Operations were fully or partially suspended due to governmental mandate
2) Gross receipts for the first, second, or third quarter of 2021 were reduced by 20% or greater when compared to the gross receipts for the same quarter in 2019
The maximum amount of the credit is $7,000 per employee per quarter for the period of January 1, 2021, through September 30, 2021. It is not too late to request a refund for the ERTC and the calculations will need to be reported on the 2021 income tax return. If a small business is eligible for ERTC, it is important that the same wages are not used for both PPP2 forgiveness and the ERTC. One of our team members will gladly discuss your specific situation to see if you are eligible and can create a strategy to maximize the benefit from both the PPP2 forgiveness and ERTC in time to be reported on your 2021 tax return.
As we approach the March 15, 2022, federal income tax due date for S corporations and partnership and the April 18, 2022, federal income tax due date for C corporations and individuals, please do not hesitate to reach out to one our team members with any questions you may have about your income tax returns, electronic filing, PPP2 forgiveness, and the Employee Retention Tax Credit.