If you’re a small business owner, you’re not immune to the economic challenges across the country as we deal with the COVID-19 pandemic, and you have likely heard about some of the programs out there to help provide financial assistance to those in need.
The most notable are the SBA’s Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL). These provided for an infusion of cash to help support payroll obligations and cover a variety of costs. But did you know that there are other opportunities for small businesses during these tough times?
Let’s start with the CARES Act, which was passed by Congress at the onset of the pandemic. One of its provisions has expanded the ability of business owners to use losses to offset income.
Business losses are called Net Operating Losses (NOLs) and occur in any given year when business expenses exceed business income. Before the CARES Act, NOLs in one year could only be carried forward indefinitely to offset 80 percent of business profits.
The CARES Act changed that. Now, NOLs for 2018, 2019, and 2020 can be carried back five years to offset 100 percent of taxable profit. This is done by either filing a special form or amending the prior year return and means you could very well benefit now from a NOL rather than wait until a future profitable year!
Seems like a slam dunk, right? Well, not exactly.
There’s a lot to consider, including as how the carryback might impact a tax break you got in a prior year. And if you have multiple businesses that file a single (what we call “consolidated”) return, there’s even more to consider. As such, it’s important to consult with a knowledgeable tax advisor, and that’s where Padgett comes into the picture.
In this ever-changing environment, it can be difficult for small businesses to keep tabs on what they need to do and, just as important, what they can do. At Padgett, we’ve been hard at work providing the advisory services our clients have needed since the beginning of the COVID-19 pandemic, including helping nearly 1,000 of our clients secure more than $58 million in funding.
Reach out to one of our trusted tax advisors today, and let us help develop and implement a plan to help your small business get the most out of the CARES Act.