January 4, 2021 3 min read

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The 2020 tax season is set to be one of the most difficult yet due to the changes implemented in the CARES Act, the Paycheck Protection Program and more. It’s important to take the time to understand how these changes impact your taxes and revamp your tax strategy. Here are a few questions to ask your Certified Public Accountant so you can work together to reduce your losses.

Will my taxes change if employees worked remotely in different states?

Working remotely has provided many Americans an opportunity to do their job wherever they want and that can include different states. Indeed a recent study conducted by OnePoll on behalf of Universal Technical Institute found that a large portion of the working public doesn’t think office jobs will come back, in any big capacity, period. While this freedom can come with many benefits for the employees, such as living in an area with a lower cost of living, it can create a tax nightmare for employers. If your employees are working temporarily in a different state, it likely won’t create income tax nexus. However, if your company has switched to permanently working from home, and an employee has moved out of state, you’ll be subject to a state’s business tax.

Related: 6 Tips for Responsible Credit Card Use at the End of the Year

When will deferred payroll tax be due?

President Trump signed an executive order allowing employers to defer the employee portion of Social Security payroll taxes from September to the end of the year for employees that make less than $4,000 biweekly. While there were talks of a potential payroll tax cut to eliminate the taxes completely, nothing has been passed at this time. That means if you chose to defer payroll taxes, the first deposit of 50% of the deferred amount by December 31, 2021 and the remaining amount by December 31, 2022.

How has my Paycheck Protection Program loan affected my taxes?

The forgiveness of PPP loans is tax-free. However, the IRS has determined that you can’t write off expenses covered by a PPP loan that’s forgiven. There is pressure on the Treasury and IRS to allow business owners to deduct costs to prevent inflating their income and increasing their tax bill, but there has been no additional guidance to address this concern. Until that changes, plan on losing deductions in amount equal to your PPP loan for 2020.

Related: What Not to Do With Your Christmas Bonus

Can I carry back net operating losses?

While the net operating loss was done away for most with the Tax Cuts and Jobs Act, the CARES Act allows a five-year carryback from 2018, 2019 or 2020. Now you can go as far back as far as 2013, 2014 and 2015 and claim a refund. The CARES Act also suspended the 80% taxable income limitation, which allows a new operating loss carry forward to fully offset taxable income in years beginning before January 1, 2021.

Related: Your Guide to 2020 Year-End Tax Planning

Working through the tax challenges of 2020 will take time. You can use these questions to get the conversation started with your CPA and then work together to adjust your tax strategy accordingly.