Tax season is important for the success of the small business. It is very important to stay in compliance with the complexities of the U.S. tax code to avoid penalties which can be significant. This is just one reason you should seriously consider working with a tax professional. It is very beneficial for your small business to take measures before the end of the year to prepare your next income tax return.
Most small businesses pay estimated taxes based on the prior year’s figures. Assess how the past three quarters compare to the first three quarters of last year for your business. If your estimated income taxes were close, you can use the comparison between this year and last year to determine if you need to increase your tax payments or save money for when you file your tax return. This will prepare you well for filing your 2020 taxes.
Large year-end business investments can provide you with great deductions on your taxes. You can make upgrades or capital improvements. If you are considering equipment upgrades, this is a good time to make the upgrade and put it into service before the end of the year. This can increase your company’s efficiency while bringing down your tax liability.
Retirement plans are powerful benefits your small business can offer employees. This is a good time to review your retirement plan offerings. A business of any size has access to specially qualified retirement plans outside of the typical 401(k) or IRA. Simplified Employee Pension Plan (SEP) allows you to put away up to 25% of your income up to $54,000. The funds only have to be contributed by the due date of the return or the date of your extension.
This is a good time to get rid of obsolete inventory you may have. The cost of inventory that you get rid of can be deducted for what you originally paid for it. This applies to noncollectable debt as well. Be sure to have records to prove both situations.
Cash based businesses can be more flexible as to when they realize expenses and income. They must record costs and income when they are spent or received. You can deduct expenses for a check that you write in 2020 but is only cashed in 2021. Likewise, for a bill you mail out at the end of 2020, if you receive payment for it in 2021, you then report it in 2021. In this way, you can accelerate your expenses while deferring your income.
Tax law is complex and has gotten more so. There have been changes to allowable deductions and expenses. Failing to properly file your taxes as a small business can be devastating for the business. Falling behind with your business taxes can result in liens or levies, wage garnishment, and even closing your business. Protect your business by using a tax professional.
Will & Trust Central.
Estate Planning for Small Business & Families. Call today for a 30 min status checkup.
3 locations to serve you better.
855 Boylston Street #1000, Boston, MA 02116
5 Raleigh Road, Marshfield, MA 02050
92 Montvale Ave, Suite 3150, Stoneham, MA 02180
Protect your home with our legal expertise.Legal guidance for home sales, purchases, renovation contracts, contractors, and more.
Starting a NEW business or know someone that could use our help? Call your friendly neighborhood attorney today.
Please leave us a 5 Star Review on Google https://g.page/r/CY4vul4WgkwxEB0/review
Freya Allen Shoffner, Esq.
Shoffner & Associates
Counselors to Small Business and Families.
Give Freya a call at (617) 369-0111 TEXT US (413) 207-6219 or email fashoffner@shoffnerassociates.com
Let us know your thoughts or suggestions in the comments
