The Wall Street Journal recently outlined tax relief offered to small businesses as a result of the Covid-19 pandemic.
PLEASE NOTE: BFS recommends enlisting the help of a tax accountant or other expert to help you navigate the complicated terrain of the federal (as well as state and local) taxation system.
Claim 2020 losses on 2019 tax returns
This is allowed if a federal disaster has been declared (which, in the case of Covid-19, it has).
Next year, carry 2020 loses back up to five years
This spring’s CARES Act allows for current operating losses to offset prior years’ taxes (2018, 2019, and 2020).
Switch to cash accounting to defer taxes
By using “cash accounting” rather than “accrual accounting,” companies won’t owe the IRS until customers actually pay them, rather than when customers commit to paying.
If your business fails or you decide to close in the wake of the pandemic…
…you’ll likely be able to use up to $50,000 in net losses to offset current or future income.