Since many businesses have been impacted by the pandemic and may be affected by the upcoming election, this is an especially important year to implement year-end tax planning for your business. The Tax Cuts & Jobs Act (TCJA) and the CARES Act have provided many tax credits and deductions to consider. Depending on the outcome of the election, tax policies could change again. Be prepared to be flexible but also start planning now.
Setting aside money for your retirement is a great way to plan for your future while also deferring business income. If you already have a retirement plan in place, be sure to make your maximum contribution. If you don’t have one in place, review the benefits and tax savings and consider setting one up today.
Are you in need of machinery or equipment for your business? Now is the time to make the purchase. Most machinery and equipment, whether new or used, that is bought and used for your business in 2020 qualifies for a 100% bonus first-year depreciation deduction. Additionally, the entire cost of heavy vehicles (vans, pickup trucks, and SUVs) is 100% deductible.
Pay Employee Bonuses This Year
Do you offer an accrual bonus to your employees? If so, you most likely wait to pay your employees their bonus until the following year. Since tax rates may change next year, it is strongly suggested to pay your employees their bonuses in 2020 instead of 2021 this time around.
Now is the time to review your business structure and determine if it’s the right one for your business. No matter what your business entity— sole proprietor, S corporation, LLC, or partnership— each comes with different tax requirements, and you may find that a different structure would better suit your business.
These are just a few tasks you can do now to help your business at tax time. If you have any questions or would like to discuss year-end tax planning strategies for your business in more detail, give us a call.