Business Tax Mistakes to Avoid During Another COVID Surge
If there’s one thing businesses have learned from the COVID-19 pandemic, it’s the importance of proper financial planning. Due to constant warnings about another surge, businesses are expected to create contingency plans and not anticipate new schemes to relieve their tax burdens. Below, we look at some tax mistakes every organization should avoid.
Failure to Negotiate Payment Terms With Creditors
As an employer, you can foresee payment challenges in the event of low revenues. Therefore, it would be wise to reach out to your creditors to request a temporary break from making payments. Alternatively, you could also ask for a lowering of your business rent for a few months.
Unfortunately, some business owners fail to renegotiate with their creditors. As a result, creditors may report late payments. They may also report your account as delinquent. This action can heavily impact your credit score, making it almost impossible to receive bank loans. If this happens, you should reach out to an NJ tax lawyer for advice on resolving your tax disputes.
Skipping on IRS payments
Businesses can no longer hide behind the unprecedented nature of the coronavirus. Additionally, we all know that late payments are only acceptable with creditors and never to the IRS. While the deadlines were extended in July this year, you shouldn’t expect another extension. It would, therefore, be wise to consider this when making your tax decisions.
Not Seeking Government Aid Programs
Failure to take advantage of government assistance programs is another mistake that can be detrimental to your business. For instance, in March this year, the U.S Small Business Administration (SBA) established the Payment Protection Act under the CARES Act. Under this program, employers can receive loans to pay their employees and make rent payments.
Additionally, the Economic Injury Disaster Loans (EIDLs) announced in June this year meant that all New Jersey businesses qualify for the EIDLs. These loans were created to assist companies that had sustained economic loss.
Also, those businesses under SBA’s plan receive automatic deferral until December this year. It would be unfortunate if a company didn’t capitalize on the opportunities to keep its business afloat.
Being Unaware of the Available Tax Opportunities
The New Jersey Business Alternative Income Tax (BAIT) introduced this year works to provide a workaround for New Jersey’s limitation on tax deductions. Essentially, this clause means that businesses that qualify for BAIT should include it in their tax planning. Despite the reopening of companies, many employers have incurred losses.
Not being aware of the state and local tax (SALT) limitations is another tax mistake because your organization misses the opportunity to benefit from a significant amount of tax savings.
Failure to File a Business Interruption Insurance Claim
As mentioned earlier, business owners should assess and create future scenarios to determine whether they will suffer an interruption in the event of a new case wave. The wise move would be to file an insurance claim or prepare to file one.
Another mistake would be the failure to establish a captive insurance company. The law in New Jersey enables business owners to form a captive insurance company that allows them to manage risks for all their business. Additionally, these companies may receive tax relief to help them recover from an economic disaster.
Previously, many insurers in New Jersey had dismissed COVID-19 business insurance claims. It was only until last month that a New Jersey court ruled against an insurer’s motion to dismiss an economic injury claim. While it is true that this was a win for businesses, it would be wise for companies to review their coverage and discuss the next steps.
A NJ tax lawyer with experience in insurance lawsuits can provide extensive advice and negotiate on your behalf to ensure your business gets reimbursed in the event of a future lockdown that could result in business closure.
Failure to make IRS payments, negotiate with creditors, or file insurance claims are all decisions that can cost your business.
The attorneys at Dopkin Law Firm in Cherry Hill have extensive knowledge of tax planning and tax controversy. To learn more about our state and local tax services, call us at (215) 519-4269, or visit our website to schedule a virtual consultation.