“So many companies were saved, but that additional administrative burden was really rough on the IRS and state tax agencies,” Orn said. “The unintended consequences of good deeds have been tough to handle.”“We file an extension for every single client, although they should pay estimated taxes throughout the year,” Orn said. “It gives us more time to do the tax return properly. You just get way more leeway and there is not as much time pressure.”There are other things to keep in mind, too.
Also, many companies that struggled through 2020 actually had a better year in 2021 as the economy rebounded. That might affect the estimated tax payments companies pay throughout the year. So companies should keep an eye on their cash flow and make sure they have enough on hand to make more tax payments, if necessary, to avoid penalties.“This year, there will be some surprise profitability, with companies ending up with bigger tax bills than they thought,” Orn said. “That’s actually a good thing. The thing to worry about for small business owners is making sure they have the cash-flow support to estimated tax payments — it could surprise you.
Finally, small businesses should keep in mind any money received via the Paycheck Protection Program or other COVID-related programs does not count towards gross income at the federal level. Unlike other types of loans, PPP loans are tax-exempt whether or not they were forgiven. Businesses may have to report some information about the loan if it was forgiven and if they are deducting related expenses.