The IRS and State of Michigan both saw the need to extend the normal April 15 filing date to May 17, 2021 for your 2020 tax returns.
In addition, Kallas has filed preventative extensions for both your business(es) and personal tax returns to September 15 and October 15 respectively.
The PPP money you received originally was taxable. Then in December 2020, Congress and President Trump signed a new law making the PPP money non-taxable. This made a huge change on your taxes for 2020. And complicated your accounting.
More complications: The IRS also made your PPP forgivable. But the money may have been received by you in 2020 and then forgiven in 2021. And what happens if not all of it was forgiven?
These were issues we were struggling with as your accountants. And the software companies that write the tax programs were really behind the 8-ball.
The ERTC credit also complicates your taxes. The ERTC is big money to you. See other article in this newsletter. But it really complicates your taxes. The amount of the credit is added back into your income (very similar to how the tips credit is handled). So, if you think you may a loss for 2020, (and your P & L is showing a loss) the ERTC may push you into having a profit for 2020. The ERTC is still well worth it. By adding the ERTC back into income, the most taxes you would pay (if you are in the top tax bracket- more than $500,000 income) would be about 43% on the ERTC money. So you still pocket 57% of the ERTC money. Of course, lower bracket taxpayers would pay less.
All the above also complicates how we calculate your estimated taxes. To avoid penalties, we had to provide you with a first quarter estimate based on 2019 instead of 2020, so it may be off. The estimates will eventually even out once we 2020 is finished. But, because we don’t know how 2021 will proceed, the 2020 estimates may be off. If you receive your 2020 return and you think the estimates are too high or too low, give us a call and we can adjust them.
We have had to extend all business tax returns due to ERTC and that will delay your personal taxes if you operate as an S corporation, partnership or Single Member LLC.
Our goal is still to have the majority of work done and to you by May 17. And we thank you for your patience and understanding.
