In the state of California, there hasn’t been widespread tax relief that applies to the diversity of businesses across our state. There are some provisions, such as a 3-month tax extension for businesses who earned less than one million in sales tax and interest-free, penalty-free tax payments for those with up to 5 million in sales tax revenue.
But the relief doesn’t help businesses struggling with cash flow or service-based businesses who don’t charge sales tax. Additionally, eligible businesses who accepted PPP loans to make payroll this year still owe taxes on the very money they needed to keep their doors open. Fortunately, there are steps you can take to infuse cash back into your business beyond tax relief.
Is Your Business Tax Ready?
Something you can do now is ensure your bookkeeping is clean, complete, and ready to deliver to your accountant at the start of January. While electronic filing doesn’t happen until mid-February, this will still put your business at the head of the line for an early return.
Additionally, you may see some of your 2020 losses returned by something known as a loss carryback. This process allows a company to apply a net operational loss to a prior year’s taxes, resulting in an immediate return by reducing the tax liability for a previous year.
It’s smart to work closely with your bookkeeper and accountant to ensure you count every expense and take every qualifying tax credit. But equally important is what you decide to do with the opportunity you have as you navigate the challenges brought by 2020.