The coronavirus pandemic has had a significant effect on many aspects of American life, including the requirement to file taxes. Understanding the tax impact of COVID-19 will help you to make the most practical decisions for your business. Here are some of the most important changes to tax deadlines and accounting processes caused by the coronavirus outbreak in the United States.
Tax Deadlines Extended
Several important deadlines have been adjusted in response to the current COVID-19 pandemic in the United States.
- The deadline for filing taxes has been extended by the IRS to July 15, 2020.
- Those who owe money to the IRS have also been granted an extension to pay their taxes. This will provide some relief for businesses in our area. The payment extension applies both to estimated tax payments as well as those for the 2019 tax year.
- No penalties or interest will be assessed for companies who pay the amount owed by this deadline. Business taxpayers will not be required to apply for these extensions. They will instead be applied automatically for this year only.
- These alterations to the normal tax filing and payment deadlines are designed to help businesses affected by COVID-19. For companies that have experienced issues related to the pandemic, the added time allotted for filing and paying taxes will provide added help in managing the financial aspects of taxation during this difficult time.
Working with a company that specializes in business tax accounting in Carmel is a solid step in the right direction for companies.
COVID-19 and Business Valuation Accounting
Most accounting professionals look at two primary factors when determining the value of a business:
- Expectations about cash flows and the timing of profits, losses, and revenues are part of business valuation. During the current pandemic, these expectations have changed significantly for many businesses. Hospitality, travel, and entertainment are expected to suffer most because of COVID-19 and the stay-at-home and shelter-in-place orders resulting from this pandemic.
- Risk and uncertainty are also affecting business valuation during COVID-19. No one knows for certain when business, retail activities, and consumer confidence will return to previous levels. Valuation methods must take into consideration the possibility that the new normal will continue well into the future.
Understanding Expectations
Two primary factors that impact expectations about your company’s cash flows are resilience and mitigation.
- Resilience refers to the ability of your business to sustain financial viability in difficult economic conditions. This is measured by looking at your fixed costs and expenses both for remaining open for business or during a prolonged closure. Debt service, employee payrolls, and other regular expenses are included in this calculation. Your available cash reserves, financial resources and revenues are compared with your costs to determine the resilience of your company.
- Mitigation refers to the activities, funding sources, and other temporary measures that your business can engage in to raise money and mitigate the effects of the COVID-19 pandemic. Some companies are turning from previous operations to the production of ventilators, face masks, and hand sanitizing solutions. These activities are mitigating the losses they would otherwise sustain in fewer sales and reduced consumer interaction.
Managing Systematic Risk
The risks associated with your business operations are considered when establishing the value of your business for taxes and other purposes. Normal risks include the following:
- Downturns in the market
- Reduced demand for your products or services on a seasonal basis
- Unexpected shutdowns that could cut into your profitability
The COVID-19 pandemic, however, does not fall into the category of normal risk and uncertainty. Recent fluctuations in the stock market indicate that the U.S. and global risk premiums will continue to rise as investors seek greater safety for their funds.
For your business, lower valuations can actually provide some benefits. This is especially true for companies that will be passed on to a family member as a gift or as part of an estate. Working with a company that specializes in accounting and business valuation in Carmel is a good first step. These accountants can assist you in determining your tax liability for this very unusual year.
The Benefits of Working With a Professional Business Accounting Firm
Now could be the perfect time to consult with a tax preparer in Carmel. These professionals can provide you with valuation services and accounting solutions for your business. If you need assistance for business tax planning in Carmel, Savage Accountancy, APC is here to serve you.
Why Choose Savage Accountancy?
Our team has the experience and expertise you need for accurate business valuation in Carmel. We also provide business tax planning in Carmel to reduce your liability for future years. Our services include the following:
- Sales and use tax return preparation
- Tax preparation for businesses and individuals
- Payroll and payroll tax services
- Bookkeeping and accounting
- Financial forensics and accounting for litigation
Our accountants will work with you to determine the right solutions for your business. Our managing shareholder, Clark Savage, has more than 30 years of professional experience. This allows us to deliver the right accounting services for your needs. We can also deliver the right valuation solutions for your company.
If you need tax preparation or valuation of your Carmel business, call Savage Accountancy, APC today at 831-298-5175. We are here to provide you with the individualized service you need now and in the future.