Tax Planning For Small Business – For some business owners, it’s been tax season since January. You are in the process of getting and correcting the information with your bookkeeper and making sure everything is accounted for correctly. You’ve gotten everything to your CPA, and they’re moving on to review your books for 2021 and figure out how much you owe the IRS or how much the IRS owes.
Maybe you’re new to small business tax planning, or you’re just getting started this year. However, we are here to help.
Tax Planning For Small Business
(If you’re still in the process of gathering bank statements, reviewing payroll, and cleaning up your books so your accountant can understand them, you might also want to consider filing an extension for your tax return. Do it and send it before October 15. instead of April 15. You’re buying yourself and your CPA time to make sure everything is correct)
Six Small Business Year End Tax Planning Moves To Make Now
But if you’re just getting started on your taxes and you plan to file by April 15, you might find these little business tax planning blog posts below helpful.
In this post, we cover several last-minute tax tips that will save you some money in April. Don’t miss the full post, but in the meantime, here’s a helpful small business tax planning guide to get you started:
“Do you want to give to charity but are tight on money? Consider saving. In fact, think about saving even if you have money. It will help you save less. Pay while it depends on the situation. Stay up-to-date and make sure your plans work to your advantage.
We also have another post full of tax reduction strategies for small business owners. It includes three important bookkeeping tips that will help you succeed:
Essential Tax Planning Tips For Your Small Business To Go For
If you like these small business tax planning tips, here’s another post you won’t want to miss: Small Business Tax Help: Getting Your Business Through Tax Season)
Do you handle your own business payroll? It’s an admirable feat, but it’s one you have to make sure is in tip-top shape. To do this, you can start by making sure you don’t make these common payroll mistakes that many businesses make when they go it alone.
(Here’s another post we thought you might find useful: 4 Really Great Tips for Effective Outreach for Small Businesses)
In this post, we also discuss several important IRS documents when it comes to small business tax planning.
Year End Tax Planning Moves For Small Businesses
This information will help ensure that once you start your taxes, you have all the necessary documents to ensure compliance.
(Looking for more tips on keeping financial records? Head to the next one here: From Shoebox to Success: How to Update Your Business’s Financial Records)
Another surefire way to make sure tax time isn’t a nightmare every year is to enlist professional bookkeeping services. If you want to find out more about what Two Ways can do for you, click here to call today.
Did you learn more about small business tax planning from this post? Here are three more posts to read:
Basic Tax Planning Strategies For Small Business
We have become big fans of SCORE Knoxville and are very grateful for the support they have given us… Small business owners always pay their taxes. This is not surprising. However, US tax law is very complex. And the IRS estimates that business taxpayers spend an average of about 21 hours dealing with taxes, including record keeping, planning, and filling out and submitting tax forms.
This complexity leads to missing year-end tax planning strategies that can reduce a business owner’s taxable income and allow them to retain more of their profits.
Chances are, you’ve bought computers, equipment, furniture, and other assets for your business that you’ve used for years.
Generally, the tax code requires you to depreciate items over their useful lives. But the bonus deduction allows you to write off 100 percent of the expenses on your 2021 tax return.
Year End Tax Planning Toolkit For Small Business Owners
If you’re thinking about buying new equipment, upgrading your technology, or making some tenant improvements, consider pulling the trigger before December 31st.
A word of caution – not all properties qualify for the bonus deduction. Buildings and their structural components are not eligible. Also, the property must be “placed in service” in 2021, which means you must start using it. So, ordering a laptop on December 30 that won’t be delivered until January 2022 won’t reduce your tax liability this year.
Using cash basis accounting for tax purposes (as many small business owners do) creates some valuable tax planning opportunities. Under the cash method, you recognize revenue when it is earned and expenses when they are paid. So, if you want to change your tax rate this year, consider whether you can extend this year’s income to next year or accelerate next year’s expenses to this year.
For example, say you completed a client project in December 2021 but have not yet billed your client for the work. If you wait until January 2022 to invoice your client, they won’t pay you until 2022, which means you won’t be able to claim the income on your 2021 tax return.
Tax Implications Of Small Business Acquisitions
Similarly, say you plan to send more of your team members to a conference next year. You don’t plan to pay the registration fees until March 2022, but if you pay them in December 2021, you can claim a deduction this year.
Posting business income and itemizing expenses can reduce your tax bill in several ways. First, if you can reduce your taxable income enough, you may be in a lower tax bracket, so you’ll pay a lower overall tax rate this year.
Second, by reducing your business income, you reduce the amount of income that is subject to self-employment tax. Self-employment tax is the self-employed version of Social Security and Medicare, and as a business owner, you pay the full 15.3 percent tax yourself—employees pay only half. So, reducing your self-employment tax burden can save you a significant amount.
Second, if your adjusted gross income (AGI) is low, you may qualify for other tax deductions and tax credits with income limitations. For example, you can reduce your traditional IRA contributions, contribute to a Roth IRA, pay lower rates on long-term capital gains, claim tax credits for education, or take medical expense deductions. be able to do
Provo, Utah Tax Planning For Small Businesses
The Securing Every Community to Enhance Retirement (SECUR) Act provides some great incentives for small businesses that set up workplace retirement accounts.
Small businesses can claim a tax credit of up to $5,000 per year for three years to help with plan setup costs. Costs include plan set-up and administration fees and educating employees about their retirement savings options.
There is an additional credit designed to increase employee participation in retirement plans. The Small Employer Automatic Enrollment Credit provides a tax credit of $500 per year for three years for small businesses that include the automatic enrollment feature in their retirement plans.
Combined, the two credits can reduce your tax bill by up to $5,500 in the first year alone.
Small Business Tax Planning: All You Need To Know From Start Up To Retirement (harriman Business Essentials): Amazon.co.uk: Cockburn, Russell: 9781906659394: Books
Charitable donations are usually not deductible on small business tax returns – C corporations’ returns. But the dividend tax benefit is not lost. Instead, they go through the business owner’s individual tax return.
To take advantage of the deduction, you usually need to claim itemized deductions instead of the standard deduction. However, the Coronavirus Assistance, Relief and Economic Security (CARES) Act now allows non-items to deduct up to $300 in charitable donations as an “income adjustment” on Schedule 1.
Just remember that the $300 deduction for non-items only applies to cash donations to qualified charitable organizations. Donating non-cash items, such as cars, clothes, or household goods, is not eligible for non-cash items. However, people who manufacture goods can still claim non-cash relief in Schedule A.
In addition, you must contribute at the end of the year. Donations made after December 31 cannot be withdrawn until the following year.
Year End Tax Planning For Small Business Owners
Health savings accounts (HSAs) are accounts that allow people with high-deductible health plans (HDHPs) to save for out-of-pocket medical expenses in a tax-advantaged account.
Contributions to an HSA are tax-deductible, money grows tax-free while in the account, and withdrawals are also tax-free as long as you use them to pay qualified health care expenses.
For 2021, you can contribute up to $3,600 for an individual HDHP or up to $7,200 for family coverage. And even if you missed the December 31st deadline, you can still contribute to an HSA in 2022 and claim it on your 2021 tax return. The deadline for contributions for 2021 is April 15, 2022.
The Employee Retention Credit (ERC) is another tax credit created by the CARES Act. It encourages businesses to keep employees on payroll during the pandemic by providing a credit against the employer’s portion of payroll taxes. Because it is a refundable credit, if calculated