Do you know what you should be discussing with your tax advisor if you had a meeting today?
Navigating the tax maze is difficult enough for business owners in a typical year. But understanding your options during a global pandemic … and compound that with altered workflow and employment upheaval, and it’s enough to make you want to file an extension. You’re not alone.
Today NADA’s Dealership Lifeline Webinar Series highlighted the latest tax provisions coming out of the CARES Act. Federal Tax Implications of COVID-19: How the New Environment Affects Dealers, hosted by Paul Metrey, NADA’s vice president of Regulatory Affairs, outlined the favorable tax provisions contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Metrey moderated an expert panel of senior tax professionals from three prominent dealer accounting firms: Jay Goldman (Boyer & Ritter); Joe Magyar (Crowe); and Dan Cheyney (Moss Adams).
Some of the most unprecedented tax provisions for individuals are happening now. Eligible individuals will receive a relief check in the amount of $1,200 ($2,400 for married couples) plus $500 for each qualifying child (under the age of 17 at the end of 2019). The IRS was directed to provide funds as soon as possible and no later than December 31, 2020.
Moreover, the CARES Act includes an Employee Retention Credit available to many small businesses to encourage them to keep employees on the payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19; and an advanced payment of the credit may be requested on the IRS’ just released Form 7200. However, the credit is not available to dealers who participate in SBA’s Paycheck Protection Program. The panel also addressed changes to the rules that apply to the individual business and net operating losses. The $500,000 cap on individual business losses has been suspended until the 2021 tax year—while net operating losses arising in tax years that begin in 2018, 2019, or 2020 may be carried back five years.
Other webinar topics included important dealer-relevant benefits such as changes to the limitation on the deductibility of business interest and how it affects the availability of 100% bonus depreciation; the depreciation of qualified improvement property, and the deferral of certain employer payroll tax payments. While some of these benefits may be realized down the road, others are more immediate so it’s important for dealers to understand which provisions can help them today. And to do that, dealers must speak with a tax advisor who knows the particulars of these provisions as well as the nature of their operations.
In this period of enormous economic strain, knowing the new tools that the IRS provides is the first step to a manageable and successful tax season. And you can be sure that you’re walking into that meeting with your tax advisors fully armed with knowledge.
NADA’s April 2 webinar will be available on the NADA Coronavirus Hub within 24 hours after each webinar.
Note: NADA’s webinar is offered for general informational purposes only and is not intended as, and does not constitute, legal or account advice. It is important that dealers consult with their tax advisor for guidance on their individual tax planning and reporting responsibilities.