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If you have never hired a tax professional, this is the year you should do so. This is the year you want to be more prepared. Pay attention! There are some tax rule changes that will have an impact on businesses as you file your 2020 tax return. With everything that transpired with business during 2020, some business tax returns will be complicated.
Each taxpayer has his or her own unique situation, therefore, some advice to the small business owners, please speak to a professional that deals with taxes. It’s always important to get organized, so here are some ideas to get started.
1. Organize your records. Make sure all your financial materials related to your business are up to date, organized and filed in one place.
2. Organize the small things.
3. Again, if you took advantage of any of the COVID-19 programs, such as SBA loans, grants and credits that was made available to you through the CARES Act, please discuss them with your tax preparer.
4. Examples:
a. Paycheck Protection Program (PPP) – PPP loans may be forgivable if certain conditions are met.
b. Economic Injury Disaster Loans (EIDL) – Per the Internal Revenue Service (IRS), any forgiven Small Business Administration (SBA) loan should be included in taxable income.
c. Employee Retention Credit – Up to 50% credit, if you have employees that were kept employed during the pandemic.
d. Review all new credits – First Coronavirus Response Act, Small Employer Health Insurance Premium Credit and Work Opportunity Tax Credit.
e. Deferral of employer payroll taxes.
5. Consider all charitable donations.
6. Consider retirement plans and retirement contributions made.
7. Look at your expenses. Separate Capital expenses from Business expenses.
8. See if you qualify for Section 179.
9. Attorney or accounting fees for your business
10. Depreciation
11. Charitable donations
12. Stock deductions
13. Medical reimbursement
14. Health insurance premiums
15. Health savings accounts
16. Healthcare for employees
17. Banked health credit
18. Life insurance
19. Education expense (professional classes)
20. Website design
As you can see this is no way an exhausted list. Consider all deductions that can help you to avoid paying more taxes than you need to, because the more deductions you have, the lower your taxable income. You must also take time to understand the tax rules so you can avoid penalties. If you don’t think you can, then get professional advice as needed.
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