Tips for Easier Business Tax Filing

Business tax filing isn’t the most exciting topic. So why should you think about it, not just today, not just during tax season, but all year long?

As a business owner, you’re responsible not just for knowing which taxes to pay, but for adhering to the schedule required by the federal and state government to pay taxes on business activities. Sole proprietors, S-corporations, LLCs—all business structures are required to file and pay the appropriate taxes.

Let’s begin by understanding changes in business taxes for 2020-2021 and then look at how you can use your ERP software to prepare for tax season all year long.

No Major Changes to the Business Tax Code – but COVID Changed Things Temporarily

First, the good news: there are no major changes to the tax code this year. However, the CARES Act and similar legislation enacted to assist businesses during the coronavirus pandemic may impact your taxes.

For example:

  • Money received by a business as part of the Paycheck Protection Act may or may not be taxable depending on how it was used. Funds received and used for payroll, mortgage, or utility payments may be considered a forgivable loan, and thus not taxed. But funds received and used for general business expenses and paid for by the loan may be deductible.
  • Economic Injury Disaster Loans (EIDL) were enacted to help businesses negatively affected by the mandatory shutdowns. Business that received this loan are required to pay taxes on it.
  • Families First Coronavirus Response Act (FFCRA) required some businesses to provide sick or family leave to employees impacted by COVID-19. If your business made these payments, it is eligible for tax credits for 100% of the cost of sick leave and family leave pay and qualified healthcare plan expenses.

There are many more temporary changes brought about by the coronavirus pandemic. While not long-term changes, they must be properly accounted for and reported.

Taxes Require Year-Long Planning

As you meet with your accountant or work on your business taxes for 2020-2021, consider the impact that taxes make on your business. Planning for business taxes isn’t just a once-a-year thing but should be a consideration all year long.

Your company’s ERP software can be used to help you prepare for business tax filing. Tracking loans by source, for example, can help you distinguish between taxable loans and subsidies that aren’t taxed.

Similarly, planning for taxes ensures you don’t overpay. Getting a refund may seem like a good thing but it’s not in your company’s best interests. A refund means you overpaid, and an overpayment is money tied up with the government that could have been put to better use in your business.

Avalara AvaTax and ERP Software

For companies that need to track sales tax and other taxation expenses across multiple states and jurisdictions, nothing beats Avalara AvaTax. Avalara integrates with many ERP software systems including Sage and Acumatica, and provides an end-to-end tax management solution.

For more information, contact Emerald TC or visit our Avalara AvaTax page.

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