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IRS Spotlights Online Tax Resources for Small Business Week

The pandemic has affected everything in American life, even National Small Business Week. This year, the Internal Revenue Service spent all three days of the event highlighting online resources that can help small businesses dealing with coronavirus-related difficulties.  

What is National Small Business Week?

The Small Business Administration (SBA) established National Small Business Week to celebrate American small businesses, honoring the accomplishments of select small business owners and recommending resources that can help small businesses across the country.

The SBA has held Small Business Week annually for more than 50 years, but the “unique challenges” of 2020 resulted in “[recognizing] the small businesses who have navigated the coronavirus pandemic while supporting their employees and communities.”

For its part, the IRS issued press releases providing resources that can help small businesses during the COVID era: Internet-accessible tax help for small businesses: links to small business-focused tax resources, rules for claiming the home office deduction, and employer tax credits.

What small business resources are available on IRS.gov?

The IRS kicked off small business week with a list of links to helpful resources, including:

Another key takeaway is that the IRS is expanding the number of languages it supports in online resources and tax forms. The Small Business and Self-Employed Tax Center added support for Chinese, Korean, Vietnamese, and Russian, and the IRS is translating basic tax information in 20 different languages.  

Who qualifies for the home office deduction?

Taxpayers who have dedicated part of their home as the primary location for running a business may qualify for the home office deduction. While this deduction is available for self-employed taxpayers—including freelancers and independent contractors—employees who are working from home do not qualify.

Most buildings that would commonly be considered a home qualify for the home office deduction, but the IRS defines what does and does not constitute “home” to reduce potential confusion:

  • Includes a house, apartment, condominium, mobile home, boat, or similar property
  • Includes structures on the property, like an unattached garage, studio, barn, or greenhouse
  • Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business

When it comes to actually determining how much they qualify to claim, the IRS outlines two methods:

  1. Simple: Take the $5-per-square-foot rate explained by Revenue Procedure 2013-13
  2. Normal: Calculate the deduction based on how much of the home is used business on Form 8829, Expenses for Business Use of Your Home

Once the amount is determined, taxpayers will need to file Schedule C, Profit or Loss from Business (Sole Proprietorship).

What coronavirus-related employer tax credits are available?

On the final day of Small Business Week, the IRS recommended employer tax credits that are intended to help businesses deal with the pandemic fallout.  

The Employee Retention Credit was created to prevent a tidal wave of employee layoffs and furloughs. “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,” the IRS says.

While state and local governments and businesses receiving small business loans do not qualify, the IRS says all other businesses are eligible if they meet either of these criteria (calculated each calendar year):

  1. The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter. 
  2. The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

The Paid Sick Leave Credit and expanded Family Leave Credit provide tax relief for businesses with employees that have been directly impacted by the coronavirus. Employees who are unable to work due to coronavirus-related quarantine or needing to providing primary care for family and children may qualify for the following tax relief:  

  • Employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.
  • Employees who are unable to work due to caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable due to the coronavirus … are entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay, or up to $200 per day and $2,000 in total.
  • Employees are also entitled to paid family and medical leave equal to 2/3 of the employee’s regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted toward the Family Leave Credit.

The IRS reminds employers that they “can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.”

For more information about National Small Business Week—including additional online resources—visit the IRS “Small Business Week” webpage.

Sources: IR-2020-218; IR-2020-220; IR-2020-221; SBA “National Small Business Week” 

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