The 2020 tax season ended. Now you get to sit back and not think about taxes for a whole year! Oh, sorry. Not you. You are a small business owner, and tax planning is a year-long exercise. The after-tax season is a great time to evaluate the previous year and incorporate tax planning into your current business strategic plan. Here are some tips to get you started:
- Evaluate your 2020 tax return for tax planning in 2021. Did you owe taxes? If you owed more taxes than you expected, it is time to determine what went wrong. Make sure you are paying quarterly taxes and that you are paying the appropriate amount.
- Take advantage of your losses. Did you report a loss in 2020? Take advantage of the CARES Act loosened restrictions on Net Operating Losses. You can carry back your losses for up to 5 years to offset income made in that year, which can get you a refund on taxes you already paid.
- Consider a business structure change. Filing your taxes for the year can sometimes cause you to realize your business has outgrown its current business structure. If you are still filing on a Schedule C, look into changing your liability and creating possible tax savings, such as an S-corp.
- Invest in good accounting software or hire a professional. Did you end up with a massive headache going over receipts, spreadsheets, and statements for 2020? At the very least, you should have good accounting software to track your income and expenses throughout the year and not just at tax time. Hiring a professional to do this for you can give you peace of mind and free up a lot of time you would have been spending on your books.
Tax planning is a significant part of any business’s success. We know you don’t like to think about taxes. Who does? We do, and we are here to help you get set up for success for the 2021 tax season. Did you report a loss in 2020? We can also help you carry back those losses and get you some money back. Don’t wait until January next year. Contact us today!