July 24th, 2020 Brad Hennebert
COVID-19 led to a lot of financial changes. In the midst of layoffs, the Paycheck Protection Program was established to give small business owners a way of keeping up with payroll and expenses. Additionally, stimulus checks have gone out to qualifying individuals across the country. However, there hasn’t been much talk about S-Corp tax relief.
If you’re an S-Corp affected by COVID-19, here are some tax relief strategies to help you get through.
Defer Payroll Tax
As an S-Corp, you can defer payroll tax payments until Dec 31, 2021. This is a long time to not worry about those payments, but remember that it’s a deferral, so the full amount will be owed eventually. The amount you defer must be paid in two equal payments on Dec 31, 2021 and Dec 31, 2022.
Employee Retention Credit
The CARES Act brought numerous benefits. Among them is an employee retention tax credit. As an S-Corp owner, you pay payroll taxes for all employees (including yourself). You can receive a refundable tax credit for the payroll tax you pay equal to 50% of the total wages you pay your employees between March 12, 2020 and January 1, 2021.
Example: Jen is an S-Corp owner with three employees including herself. Both employees will make $40,000 by January 1 (totaling $80,000). She will pay herself $50,000 by then. She then qualifies for a payroll tax credit of $65,000.
Keep in mind that you only qualify for this credit if your business was suspended in any way due to the pandemic, or if your gross profits (for any calendar quarter) were less than 50% of what you received last year in the same time period.
PPP Loan (Small Business Loan Program)
S-Corp owners can apply for the PPP loan, but it can be tricky. First of all, the loans go through banks, meaning you must apply and get approved. Banks can approve or deny any S-Corp for whatever reasons they see fit. Furthermore, the loans are in high demand, meaning that banks can’t keep up with all the requests. Complicating things even further is that S-Corps can be as small as a single real estate agent or have a network of employees. Your size and type of business will also affect your approval.
If you have any questions or need advice about S-Corp tax relief strategies, call Tax Defense Ohio at 614-524-4888 or 614-310-0506.