Maybe CPAs just like to complain, but rarely a year goes by when accountants aren’t heard talking about congress passing last-minute tax laws, IRS filing season delays, or clients unable to keep up with never-ending changes to the tax code. Much of that is just as valid this year as any other, especially on the individual side of the tax business, which has seen expanded benefits for child care, health care, retirement, and other tax breaks. Conversely, the business side of the tax code has been delightfully quiet this year.
Much of what will occupy our attention in business taxes this year is not new or unexpected but a continuation of changes from prior years. The Paycheck Protection Program (PPP) began in 2020, but many taxpayers did not request or receive forgiveness for these loans until 2021 and will have to properly account for that on taxes to be filed soon. Fortunately, the guidance on forgiveness has changed since the program began, and we’re now confident forgiveness will be tax exempt and that no tax benefits will be reduced as a result.
As provisions of the CARES Act passed in response to the pandemic wind down, limits on the business interest expense deduction, net operating loss limits, and excess business loss rules will return to what they were under the Tax Cuts and Jobs Act. Accordingly, businesses still losing money will now have a harder time eliminating their tax burden and using business losses to reduce taxes on non-business income.
Likewise, the recently passed Infrastructure Investment and Jobs Act unexpectedly ended the Employee Retention Credit program as of Sept. 30, 2021. This program provided employers a payroll tax credit up to $10,000 per employee per quarter. The program was widely ignored in favor of the PPP early in the pandemic, but changes made just over a year ago mean that many taxpayers may now qualify that hadn’t before.
At the state level, recent legislation may benefit small business owners harmed by the Tax Cuts and Jobs Act’s provisions limiting deductions for state income taxes. Illinois business owners should speak to their CPAs about this new opportunity for 2021.
It seems even in a quiet year there’s plenty for tax accountants to keep up on. Take a moment to talk with your CPA this tax season and understand how these changes might impact your business’s tax compliance and planning for the coming year. •
Doug Reiling is senior tax manager for Centennial Tax & Accounting, Davenport.
