Corporate Tax Tips for a Down Year

As a business owner, it’s possible that much of your time is consumed thinking about paying taxes and ways to minimize tax liability, especially since taxes are such a significant expense of operating.

Without a doubt 2020 has not been a typical year, prompting Congress and the IRS to find ways to create tax breaks that benefit business owners who are struggling with the economic downslide resulting from the COVID-19 pandemic. 

We have good news to report for business owners looking for tax-saving opportunities: the CARES Act reinstated net operating loss (NOL) carrybacks, which present an opportunity to realize permanent tax savings for businesses. The CARES Act permits NOLs from 2018, 2019, and 2020 tax years to be carried back to the previous five years and suspends the 80% of taxable income limitation through 2020. For example, a 2020 corporate NOL can be carried back to offset income from 2015 that was subject to a 35% tax rate rather than carried over to 2021 which is subject to a 21% tax rate. The 14% rate differential represents a permanent tax savings.

This flyer includes examples of common business tax planning possibilities to accelerate deductions to increase the NOL available to be carried back.

We’re living through unprecedented times and it’s understandable that all the tax rules can be highly confusing. It’s advisable to consult with a qualified professional advisor to help you make the right choices and share with you other tax breaks that you’re entitled to take advantage of.