Just a few months ago, barely anyone expected that the new coronavirus would expand into a global pandemic. This outbreak has changed the financial reality of many different people in numerous industries. As a result, workers have been laid off, lost income, or lost their ability to work. Many businesses have also been forced to shut down in an attempt to limit the spread of the virus.
The good news is that governments throughout the world are initiating steps towards helping affected workers and their families. From providing paid sick leave to expanding family leave and tax credits, you can expect the tax return that you file during this financial year to be quite different from those of recent years.
Here's how the COVID-19 pandemic may affect your tax accounting obligations during this (and the next) financial year.
1. Benefits for employees
If you own a business, your tax accounting requirements may change drastically due to COVID-19. For example, some employers may be directed by the government to provide benefits to their employees. These benefits include paid sick leave, unemployment, and family leave. The purpose of these benefits is to buffer the financial impact that workers have experienced over the past few weeks.
To make it easier for your business to handle these benefits, the tax office might provide deductions that match how much you spent on these costs (a 100% tax credit for the expenses incurred). This means that you'll need to pay attention to how much you spent on funding employee programs that provide benefits. Keeping track of such expenses will allow you to claim the tax credit and reduce the financial burden on your business.
2. Deductions for lost income
Every country has taken a unique approach to help businesses and sustain the economy. Some have decided to provide tax deductions for lost income, where the company can reduce its tax burden by close to the amount that is lost during the period of closure. Deductions for lost income will significantly change how you prepare your taxes during this financial year. For example, you may have to provide detailed records of lost income, accounts, and other relevant financial documents to prove how much you actually lost.
3. Tax filings for self-employed persons
If you're self-employed, your tax reporting might also change significantly. For example, you may be eligible for deductions that include sick and family leave. Keep track of these expenses so you can file accurate returns and minimise your financial burden.
To learn more, contact an accountant.
Share5 May 2020
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