Tax season is in full swing and we wanted to answer some questions to help you prepare and submit your taxes this year. We worked with Mr. Samir García, Certified Public Accountant (CPA), for guidance on some of the top issues small business owners should be aware of before filing their 2021 taxes. Each tax situation is different, so you should always consult with a professional about your specific returns.
Do I Need a Professional?
The IRS has placed special emphasis on the importance of filing tax returns completely, accurately, and precisely. It has been reported that a small mistake on reporting financial assistance, such as Economic Impact Payment #3 or Advanced Child Tax Credit Payments, can cause up to six months of delays. Every tax situation is unique, so you may want to work with a CPA or tax preparation firm to ensure you file correctly.
What Do I File and When?
First, let’s start with some upcoming tax deadlines.
| What? | When? | Sent To Whom? |
| 1120S & 1065 | 03/15/2022 | IRS & States* |
| 1120 | 04/18/2022 | IRS & States* |
| 1040 | 04/18/2022 | IRS & States* DC deadline is 04/18/2022 MD deadline is 07/15/2022 VA deadline is 05/1/2022 |
| 1041 | 04/18/2022 | IRS & States* |
| Quarterly Estimated Tax Payment (1Q22) | 04/18/2022 | Treasury and Your State |
| 7004 | 04/18/2022 | IRS & States* |
| 990 | 05/16/2022 | IRS & States* |
| Quarterly Estimated Tax Payment (2Q22) | 06/15/2022 | Treasury and Your State |
| 1120s, 1065 Extensions | 09/15/2022 | IRS & States* |
| Quarterly Estimated Tax Payment (3Q22) | 09/15/2022 | Treasury and Your State |
| 1040, 1120 Extensions | 10/17/2022 | IRS & States* |
| Social Security Tax Deferral Payment | 12/31/2022 | SSA |
| Quarterly Estimated Tax Payment (4Q22) | 1/16/2023 | Treasury and Your State |
| 1099-NEC | 01/31/2023 | Recipient and IRS |
| W2/941s/1096 | 01/31/2023 | SSA, IRS |
*Be sure to double check the deadlines for various tax forms. In the last few years, extensions were approved at the State and Federal levels, so due dates may change.
Do I Report PPP Loan Forgiveness?
Paycheck Protection Program loans (PPP 1 & 2) that have been forgiven must be included in the transmission of tax returns, but be aware of the specific rules and forms needed for accurate reporting. It’s also important to note that that loan forgiveness does NOT construe income, so it should not be added to your gross income total. This is yet another reason to work with a tax professional—incorrect reporting of PPP 1 & 2 as income could have costly consequences.
What About Grants Awarded to my Business?
If you have received a Federal, State, or local government grant, it is likely considered taxable income that must be accounted for and reported. Different businesses received Local and State level grants. The “approved” use of the funds, regardless of the rules specific to the grants, must be vetted and adjusted for Federal and State income reporting. For example, a common mistake for some taxpayers is to include a personal residence mortgage payment as a deductible expense for the business. Taxpayers can be confused on the uses of these funds. Moreover, some specific grants may be free of fiscal obligation at a State level.
What about EIDL and Family Leave Credits?
Depending on employment status and payments, different situations require attention to reporting this year. Payroll has implications on both EIDL Grant and FMLCs. Grants must be reported correctly for the purposes of income taxes.
| Is My Third Stimulus Check Payment Taxable? No, but it must be reported. The third stimulus check—Economic Impact Payment #3 (EIP3)—from the federal government is not considered “income,” it’s actually an advance payment of a tax credit, which isn’t taxable. However, it is mandatory to report EIP3 on your 2021 tax returns. If you did not qualify for, or did not receive, the full amount of the third Economic Impact Payment, the IRS states you may be eligible to claim the 2021 Recovery Rebate Credit based on your 2021 tax year information. I Received IRS Letter 6419…What Do I Do? |
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Other Tax Items to Keep in Mind
If you incurred any of the following items in 2021, be sure to include them in your tax preparation.
- Gambling Losses
- Investment Expenses
- Proceeds from Broker or Barter Exchange
- Medical and Dental Expenses
- 8829s – Allowable Expenses from Business Use of Home
- Contributions to Retirement Accounts
- Change in Filing Status
- New Children and/or Change in Dependents
- Estate or Trust Income
- Foreign Accounts, FBARS, Cryptocurrency
- Foreign business income
Be Extra Careful This Year
It is especially important this year to be careful as you complete your tax returns. The IRS will be looking more closely at certain numbers and you’ll have little room for corrections. Any misreporting can result in long delays in the processing of the returns, so be sure to speak with a professional if you have any questions or concerns BEFORE you file your 2021 tax returns. Remember, each tax situation is different, so you should always consult with a professional about your specific returns.
Thank You Samir!
Maryland Women’s Business Center is extremely grateful to Mr. Samir García, CPA, for his assistance with this article and ongoing support of the MWBC community. While this is an especially busy time for his practice, if you have questions or need support filing your 2021 taxes, contact Samir at samirgarcia@gmail.com or (202) 815-1114 to see if he can assist you.