The Federal Tax Payment Extension & Your Business

There’s no denying coronavirus has impacted businesses in the contracting and electrical sectors. As a business owner, you may be wondering how the tax extension works—especially since we are now past the typical tax deadline. While we always suggest consulting with a licensed accountant, here is what we understand about the coronavirus tax extension.

File as soon as possible if you’re getting a return.

Contractors and electricians in your company whose taxes are taken out of their paychecks should file as soon as possible so they can get their refunds. As Treasury Secretary Steven T. Mnuchin said: “Americans should file their tax returns by April 15 because many will receive a refund. Those filing will be able to take advantage of their refunds sooner.”

The tax deadline extension to July 15th is for everyone, but it’s especially helpful for 1099 employees and small businesses.

1099 employees pay their first two quarterly payments for 2021 by July 15th.

IRS payments are due in full by July 15th, at which point money owed starts accruing interest. Advise your 1099 workers to get their bills settled or talk to the IRS about a payment plan.

If your workers pay their own taxes, they might pay them quarterly each year. Contract employees would normally make payments in January and June for 2021; however, both quarterly payments will instead be due by July 15, 2020 to avoid late fees.

Typically, as long as you pay the same amount you owed in your 2019 taxes by January 15, 2021, you shouldn’t accrue significant charges. Double check with your accountant to see what they recommend if you’re not able to put enough money towards your taxes for next year.

Small business owners can postpone their 2019 tax payments until July 15th.

Much like contract workers, small business owners can postpone their payments until July 15th. For some of you, this may mean a few extra months of operating expenses.

You can also get a tax credit for 2021 taxes. If your revenue has declined because of COVID-19, chances are you qualify for the Employee Retention Credit. In the event your operating budget is exhausted, file a form 7200—which allows for an IRS credit before tax time next year. The purpose of the Employee Retention Credit is to help ensure you and your team stay afloat during this time, so check with your accountant to see if you qualify.

The government has also extended the Family Medical Leave Act (FMLA) to help alleviate some of the financial burden of coronavirus for your business. We wrote a blog on that as well , but you can also read the full FMLA extension—the Families First Coronavirus Response Act—on Congress’s website.

As you work through your taxes a little bit later this year, make sure you keep an eye on our COVID-19 resources tab on our blog. We keep up-to-date information for you there, especially in the contracting and electrical spaces.