COVID-19 Impact on Tax Terrain: A Close Look at Federal and California State Tax Regulations

How has the COVID-19 pandemic affected federal and state tax regulations in the US, specifically in California?

The COVID-19 pandemic has resulted in a number of changes to federal and state tax regulations in the US, including California. Here are some key changes that have been made:

1. Extended tax deadlines: Both the federal government and California have extended the tax filing deadline for individuals and businesses. The federal deadline was extended from April 15th to July 15th, 2020. In California, the deadline for personal income tax returns was extended to July 15th, 2020, and the deadline for state tax payments due between March 15th and July 15th was extended to July 15th, 2020.

2. Payroll tax deferral: The CARES Act allows employers to defer payment of their share of Social Security taxes for the period beginning March 27th, 2020 through the end of the year. Half of the deferred amount will have to be paid by December 31st, 2021, and the other half by December 31st, 2022.

3. PPP loan forgiveness: The Paycheck Protection Program (PPP) was created as part of the CARES Act to provide loans to small businesses to help them maintain their payroll during the pandemic. If employers meet certain requirements If employers meet certain requirements, they may also qualify for additional tax credits at both the federal and state levels. For example:

4. Employee Retention Credit (ERC): Eligible employers can claim a fully refundable tax credit equal to 50% of up to $10,000 in qualified wages for each employee, for a maximum credit of $5,000 per employee. The credit is available for wages paid between March 12 and December 31, 2020, and between January 1 and June 30, 2021.

5. Work Opportunity Tax Credit (WOTC): Employers who hire individuals from targeted groups, such as veterans, ex-felons, and those on government assistance, may be eligible for a tax credit of up to $2,400 per qualified employee.

6. California Competes Tax Credit: The California Competes Tax Credit is a state-level tax credit that is available to businesses that want to expand in California. The credit is awarded through a competitive process and can be worth up to 35% of the total project cost.

7. New Employment Credit: Businesses that hire employees from designated "communities with the greatest need" may be eligible for a California tax credit of up to $31,000 per qualified employee.

By taking advantage of available tax credits, businesses can reduce their tax liability and increase their bottom line. However, it's important to ensure that all eligibility requirements are met and that the proper documentation is maintained to support any claimed credits. Working with a qualified tax professional or CPA can help businesses navigate the complex tax credit landscape and ensure compliance with all applicable tax laws and regulations.