Actions

Here's what every small business owner needs to know before filing their 2021 taxes

Tax Season Begins
Posted at 4:43 PM, Mar 02, 2021
and last updated 2021-03-02 18:39:10-05

SOUTHFIELD, Mich. (WXYZ) — “When we had to shut down, it was a very scary time as a business owner,” said Hellen Gooden owner of Bellviso Global.

For four months, the home of Bellviso Global, a beauty studio and training academy, sat idle. In a bid to survive, Hellen Gooden sought out and received Coronavirus relief, both federally and as a loan from the small business administration’s - EIDL program and locally from various grants.

“We did get an Oakland County Economic Injury Grant, that was very helpful, and then also Flagstar rewarded us,” said Gooden.

The financial support was critical but somewhat stressful, inciting a wave of additional questions and uncertainty.

"I think the taxes were a little bit more complex,” said Gooden. “We got worried on how much money we would owe.”

Hellen is not alone- Michigan small business owners across the board- especially anxious about their taxes this year.

“As a business owner, it’s so important that you know your numbers,” said Financial Advisor Angela Mitchell.

Advisors like Angela Mitchell, from DNA Financial Services mentor with small business resource hub, SCORE Detroit, in high demand. She’s hoping to put the minds of small business owners at ease.

For one, when it comes to that wildly popular PPP loan, she wants borrowers to know, they’re on the hook for much less.

“Not only is that loan forgivable but on top of that the expenses that were associated that you used those funds for, you can still write off,” said Mitchell.

The government making PPP expenses deductible in December, turning what would have been a burden into a gift. As for the EIDL loan, taxes on those funds work like any other loan.

"The loan payments themselves are not deductible,” added Mitchell. “However, the interest that you pay on those loans are deductible as an expense.”

Good news, the cash advance EIDL grant is not taxable which is notable given most other grants are. Since tax liability can vary, if you did get a grant when filing taxes.

“Make that distinction of what was actually revenue that came in for product sales or services,” said Mitchell. “Or income that you received as a result of grants.”

Remember to get organized before you see your tax preparer.

“The biggest challenge with most small businesses is not having their paperwork together.”

A reminder, if you need help, reach out to SCORE, they do offer free consulting services.