Guest Commentator: Brian D. Kitchen, Director, Tax Strategies, Kreischer Miller @KreischerMiller

What tax provisions should small to mid-size businesses be aware of in the CARES Act and how can the provisions offer relief?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a stimulus bill which provides much needed relief to small to mid-size businesses. It not only provides businesses access to funding through loan programs such as the Payroll Protection Program (PPP), but the less touted business tax provisions offer lucrative opportunities that all businesses should explore.

Payroll Tax Deferral

Businesses looking for immediate cash can delay the timing of the required federal tax deposits for certain employer payroll taxes between March 27, 2020 and December 31, 2020. Amounts will be considered timely paid if 50 percent of the deferred amount is paid by December 31, 2021, and the remainder by December 31, 2022. Those businesses that took advantage of the PPP loan can also take advantage of the payroll tax deferral, with one caveat. Businesses that have received a PPP loan, but whose loan has not yet been forgiven, may defer deposit through the date the lender issues a decision to forgive the loan.

Employee Retention Credit

Employers whose operations have been fully or partially suspended as a result of a government order and/or have experienced a greater than 50 percent reduction in quarterly revenue are eligible for a refundable payroll tax credit for 50 percent of wages paid by eligible employers to certain employees during the COVID-19 crisis. The wage limit is capped at $10,000, which makes the maximum credit $5,000 per employee. The effective date of the credit applies to wages paid after March 12, 2020 and before Jan. 1, 2021. Recipients of PPP funds are ineligible for this tax credit.

Technical Correction to Qualified Improvement Property

Those businesses that either renovated or acquired commercial buildings in 2018 and/or 2019 will be relieved to know that the CARES Act now provides an opportunity to expense certain improvements made to the interior portions of those buildings. The Act corrected a drafting error in the Tax Cuts and Jobs Act which previously required certain improvements to be capitalized and depreciated over 39 years. Businesses now have the ability to monetize those investments through tax deductions, which could provide immediate cash flow in the form of tax refunds.

Business owners looking for fiscal relief and additional cash flow should seek to take advantage of the tax provisions within the CARES Act. With proper planning, these provisions can help businesses manage the crises.

Kreischer Miller is a member company of the Chamber’s Middle Market Action Team (MMAT), a consortium of leaders driving rapid growth in companies with annual revenues between $10M & $1B through targeted programs and strategies.