End of Year Tax Tips for Small Businesses You Need to Know Before January 1, 2021
Small businesses are the heartbeat of any community. They nourish, nurture, inspire and inform with the myriad goods and services they provide, and our main streets, promenades and thoroughfares would be lifeless without them. Yet most struggle to keep pace even without the unforeseen hardships of a global pandemic. As we close out 2020 with a renewed sense of hope for the year to come, here are some tips to help small businesses and our self-employed community plan and prepare for brighter days ahead.
Everyone knows that the COVID-19 pandemic has affected businesses across all industries. As we wrap up a tough business year, let’s take a look at some advice for small business owners for 2021.
Review your current financial position
Make sure you have made the required estimated tax payments, and also check your withholdings. If you received any untaxed unemployment payments, you can still adjust your withholding to have additional taxes taken for the last weeks of the year if you are now working again.
Take advantage of the Required Minimum Distribution break for 2020
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, waives required minimum distributions (RMD) during 2020 for IRAs and retirement plans, including beneficiaries with inherited accounts. This waiver includes RMDs for individuals who turned age 70 ½ in 2019 and took their first RMD in 2020.
Consider making a charitable contribution
The CARES Act provides a $300 deduction from income for charitable giving on the 2020 income tax return, regardless of whether you take the standard deduction or itemize.
Consider paying off 2021 bills
Now is a good time to prepay deductible expenses, medical and tuition bills.
Make sure your books are up-to-date
It’s important to have a good understanding of what your bottom line so that you can make better tax saving decisions before it’s too late. Also, W-2 and 1099 season is fast approaching, so be sure you have the appropriate W-4s and W-9s on file for each employee and contractor to make the reporting process seamless. You may also consider acquiring assets to benefit from depreciating the cost over a period of years, depending on asset type.
Contact your financial advisor
Educate yourself on where your investment portfolio stands and how you can maximize your tax savings.
Contact your accountant
Educate yourself on the new tax laws and benefits that you may be entitled to due to the pandemic. If you received a Paycheck Protection Program (PPP loan) or an Economic Injury Disaster Loan (EIDL), it’s important to also understand the implications of reporting and how it will impact your current financial situation.
Janel Varnadoe, EA – Founder & CEO of J&S Accounting & Tax Services, Inc. is a Florida native from the beautiful Florida Keys, and has a Masters in Business Administration with a concentration in accounting and a Bachelor’s in Legal Studies. Varnadoe has received her enrolled agent license through the IRS, which is the highest credential the IRS awards, and strives to provide excellent service to her clients, which includes building trust, maintaining security with client information, consistency, and creating efficient systems that work for her client’s specific business needs. J&S Accounting & Tax Services, Inc is a full service bookkeeping services and tax preparation for small to large companies.
“Do you keep your own books? Do you just need a second set of eyes? Give us a call. We can take a look, help you find spending gaps, review your books for tax credits, make suggestions to maximize savings. We can help!”