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Tax Taker CEO Ari Palmer: Preparing for the July 15 deadline

By Ali Montag, Jun 26, 2020 9:54:16 AM

TaxTaker CEO Ari Palmer shares her playbook for tax season.

Ari Palmer is the co-founder and CEO of TaxTaker, an Austin, Texas firm that helps companies take advantage of the research and development tax credit. With the deadline to file 2019 taxes just a few weeks away, Palmer shared her tips, tricks, and advice for getting organized. Her answers have been lightly edited and condensed.

The deadline to file corporate taxes for 2019 is on July 15, 2020. What should you do if you aren’t ready?

If you aren’t organized and feel like you're in a scramble, that's okay, you can go on extension. Some businesses think they're going to get some penalty or have to pay a fee, or that the IRS is going to audit them if they file for an extension, but that's just not the case. Remember though that the extension grants extra time to file the tax return, not to pay taxes. So, any additional 2019 tax you owe will still need to be paid by July 15th. With the pandemic, we've been seeing a ton of companies go on extension and CPAs are recommending that as well. Companies still have until September 15th and October 15th, respectively, for Partnerships/S Corps and C Corps with the extension. That’s still on time. We even suspect that the deadline might get pushed out a little bit as the Paycheck Protection Program continues.

If I received a Paycheck Protection Program loan, how will that impact my tax filings? 

The great news is, for purposes of this year,  you don't need to do anything. All of this is going to be in consideration for next year, the 2020 tax year, which you’ll file in 2021. Also, any forgiven loan amount shouldn’t be included in taxable income for the year, though for now any expenses paid for with the forgiven loan won’t be tax deductible either. 

The U.S. Small Business Administration and the Treasury Department are continuing to provide guidance on the repayment of PPP loans, so the best thing to do is to keep track of that and collect as much documentation as you can so that next year, you’re ready.

If I laid-off employees and rehired them in 2020, what should I do to prepare for my tax filings next year?

At a basic level, that’s when it’s going to be helpful to get really organized in Q3 and Q4 of 2020 with proper bookkeeping and accounting. Even professionals are going to have to go through all of the payroll journals carefully because we’ve seen so much chaos with folks being let go and brought back on.

It's surprising how many businesses are not staying up to date with their QuickBooks or their Xero entries. Often, they think that they need a CFO to do this, but there are so many great resources at a bookkeeper level that can keep those companies organized for really affordable rates.

What’s the best way to get started with organizing my 2020 tax information?

The payroll providers are doing a really great job with staying close to these PPP updates. Gusto and some of the popular PEOs like Trinet are trying to be really proactive. So I think the best strategy is leaning on those resources and those dedicated account managers to make sure you know where those reports are. 

What will be important from a payroll tax perspective is just making sure you’re aware that if you deferred your payroll taxes that you know that you do owe that money in the coming years. You don’t want any surprises. 

One thing to do: If you’re still putting together information for 2019 right now or on extension, go ahead and just do the same exercise for whatever you have here in 2020. We're already halfway through the year, so it's likely that you have at least half of that data somewhere, right? You can be really proactive and ask your payroll provider to share both 2019 and 2020 reports.

What if my business did really well in 2019 before the negative impacts of 2020? Is there a strategy I should use to offset those losses? 

If you’ve done really well you want to maximize allowable expenses and deductions to minimize your taxable income. When you can, make sure you're taking all of the deductions and credits available to you. The R&D tax credit is one of the biggest ones available for innovative companies and can be very lucrative.  Timing is everything when it comes to tax planning. For this reason, it can be advantageous to work with a seasoned tax CPA or attorney to help identify savings opportunities and plan proactively for 2020. They can also help to keep you abreast of any additional incentives created by Congress in the near future to address the pandemic.

Going forward from a tax planning strategy, it's not going to hinder you in 2020 to have had a well-performing year in 2019. It might even give you the flexibility to kind of be more creative if your business looks a little bit different.  

What are the best creative strategies you’ve seen?

We’ve seen some companies that are continuing to grow and hire, even in this difficult environment. So if they're maximizing their deductions and generating R&D credits, for instance, that's actually going to put them in a great position to lower their operating costs per quarter going forward as they continue to hire. 

I’ve also been seeing people get really creative about their invoicing strategies and timely collection.

Some companies that are healthy with cash in the bank, maybe they’re venture-backed, they aren’t necessarily worried about paying large tax bills but they are worried about revenue recognition. So invoicing, changing any invoicing practices and, and getting a beat on timely collection can really make a big difference to your burn rate. That can include invoicing more quickly, more frequently, providing incentives for early payments, or simplifying the payment process itself. 

Also, it is still shocking how many companies just miss out on the credits available to them. Companies not earning a lot of revenue may think “I’m not paying high taxes, so why would I need a tax credit.” But in fact, for the first five years of a business, they can take advantage of tax credits as a payroll offset so effectively they can boost cash flow per pay period or quarterly basis depending on their payroll provider and reduce their operating costs by 6.2% a year.  It can be worth its weight in affording companies to hire another developer or many!

So in the event any company has ongoing development, they need to be taking a look at it. There are also a lot of grants available. You can search through both local or state or federal government programs. That can start with the SBA, but it can also be through industry-focused grants. There are also some grant writing companies that specialize in helping secure grants like Grant Engine and Inspiralia.  Also, don’t underestimate the power of checking with your local economic development department.  A lot of founders don't realize that there's a business community that has already designated funds for certain projects or for companies to sustain hiring in their community. It’s an option to fund your business in a non-dilutive way and a great source of funding!

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