PPP Round 2, 1099 Changes, and More: A 2020 Accounting Update for Small Business Owners
We have finally reached the end of an extremely challenging year for everyone on the planet. So now, what do you need to know to make sure that your business is ready to go into the new year ready to live its best life? Here are some valuable tidbits to help you plan your accounts, tax filings, and more:
The Latest News on Small Business PPP Loans
One of the most important updates for small businesses this year was that another stimulus bill dramatically passed in the last few days of 2020. What this means for business owners is that you are now eligible for ANOTHER PPP loan – if you qualify.
Companies with fewer than 300 employees who have already used (or will fully use) their PPP funds from their first loan.
Business, Self-Employed workers and independent contractors (and some nonprofits).
Sole Proprietors, independent contractors, and eligible self-employed individuals.
Any business that can show that its gross revenues were down at least 25% from the 1st, 2nd, or 3rd quarter of 2020 when compared to the same quarter in 2019.
You will need to have your 2019 tax return completed in order to apply for this second round of PPP, so if you're behind on that, consider this your incentive to finalize that paperwork.
If you have not yet received a PPP loan then you can still absolutely apply for your first PPP loan at this time, following the same guidelines that were set earlier in the year.
1099 Updates to Impact Business Owners
Another important change to note is that the 1099 form that you usually send vendors whom you've paid in either cash, check, or transfer of funds for services rendered has changed from the 1099 MISC form to the NEW 1099 NEC form. This new form has a strict filing deadline of January 31, and you will be penalized for late filing. Make sure you have collected a W-9 form from your vendors so that you have all this information on file to help ensure that you make the deadline.
The 1099 MISC form will still be used for all other reporting requirements that are NOT non-employee compensation. If you are sending a form out for rents paid, please use the 1099 MISC for this.
A Tax Rate Update for C Corporations
For any C Corporation businesses, this may be your final year to have your net income taxed at the decreased tax rate of 21%. If you have the option to push payments or purchases to 2021 and decrease that year’s income instead of this year, you may consider that as tax rates are likely to increase once President Elect Biden takes office.
Looking Ahead to a Prosperous 2021
2020 was a year unlike any other, but despite the "unprecedented" uncertainty, one thing never wavered: the resilience of business owners across America and the globe. We saw restauranteurs banding together to create support funds for furloughed staff, fashion brands that pivoted to create PPE for first line healthcare workers, and grocers that donated product to help feed families impacted by COVID-related layoffs.
This year has ended, and with it comes a new round of PPP to benefit businesses, as well as the prospect of business as BETTER once COVID vaccinations achieve widespread access and customers feel comfortable traveling, building, and buying once again.
We're looking ahead, and are ready to welcome 2021 with you, with eyes facing forward and optimistic spirits.
Best wishes in this New Year!