Year-End Small Business Tax Strategies
As this year is ending, now is the time to take a closer look at your company’s current tax strategies to make sure they are still meeting your needs and take any last-minute steps that could save you money come tax time. Tax (and financial) planning are year round for us and our clients and now is also a good time to start planning for next year.
We hope you find the tax planning thoughts set forth in this blog informative and helpful. With all that in mind, please contact us if you have any questions or if you would like our affiliated CPA firm, Smoak, Davis & Nixon LLP, to discuss developing a customized plan for your tax situation.
Here is a look at some of the tax issues facing small businesses as year begin their end of year review.
Key Tax Considerations You Should Be Aware Of
By now, we’re in full swing under new tax laws. The Tax Cuts and Jobs Act (TCJA) was signed into law at the end of 2017, with taxpayers seeing the real affects when they filed their returns in 2019. This legislation has made a profound impact on many taxpayers and has created new planning opportunities. Here are a few items to note:
- Choice of entity — With the decrease in the corporation tax rate to 21% and the addition of the qualified business income (QBI) deduction, it may be time to reconsider your type of business entity. This is a complex decision that has more than tax implications. We can help you walk through the pros and cons.
- Entertainment Expenses — Entertainment expenses are no longer deductible. Although that sounds simple, there are many complications. Business meals are still 50% deductible, but there are additional stipulations. This could mean you need to track your expenses differently in your accounting system than you have in the past. It could also mean you need to request more information on invoices that could involve both entertainment and meals.
- Purchases of property and equipment — With tax-favorable options available to businesses, many purchases can be completely written off in the year they are placed in service. Let us help you determine when and how to purchase equipment as year-end approaches, so you receive the best tax treatment.
- Method of accounting — More businesses have the opportunity to use the cash method of accounting. This can be helpful for cash flow purposes and is simpler than the accrual method. There are qualifications that must be met, but our affiliated CPA firm, Smoak, Davis & Nixon, can help you understand if your business would benefit.
We’re here to help you navigate tax law changes and ensure you receive the most favorable tax treatment.
Partnership Audit and Adjustment Rules
New audit and adjustment rules are in effect. Careful planning today will help mitigate any unfavorable consequences on both the entity and the partners themselves. Also, be aware that even if your business isn’t a partnership, you’ll want to evaluate the effect these new rules could have if you’ve invested in any partnership.
Note State Return Due Dates for Tax Returns
Due dates changed for several types of business returns a few years ago. States are continuing to adopt new due dates in response to the changes and we can help you determine the due date in the states in which you are required to file a return. Our affiliated CPA firm, Smoak, Davis & Nixon, files in most all states for its tax clients. Please contact the CPA firm if you need to talk with one of the firms tax professional regarding state and Federal tax filings.
Fraudulent Activity Remains a Significant Threat
Our firm takes security very seriously and your business should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:
- Receive a notice or letter from the Internal Revenue Service (IRS) regarding a tax return, tax bill or income that doesn’t apply to you
- Get an unsolicited email or another form of communication asking for confidential information such as payroll or employee data
- Receive a robocall insisting you must call back and settle your tax bill
Make sure you’re taking steps to keep financial information safe. Let us know if you have any questions or concerns about how to go about this.
The Affordable Care Act (ACA) and Your Taxes
Recent tax law changes repealed the penalty that the ACA imposes on individuals who do not have health insurance. However, other aspects of the ACA are still in place. Contact our affiliated CPA firm, Smoak, Davis & Nixon LLP, if you have questions about how this affects your business.
Be Sure Your Retirement Planning is Up to Date
Have you revisited your company’s retirement plan lately? Take a look at the many retirement savings options in order to make sure that you are taking advantage of tax deductions as well as providing opportunities for owners and employees to save for retirement. Retirement plan design can also impact QBI deductions, touched on earlier in this blog posting.
Year-End Planning Equals Fewer Surprises
There are many other opportunities to talk about as year-end approaches. And, many times, there may be strategies such as deferral of income, prepayment of expenses, etc., that can help you save taxes. We are here to help.
River Capital Advisors and its affiliated CPA firm, Smoak, Davis & Nixon, can help small business clients and their owners with all aspects of the business needs – accounting services, tax preparation and planning services – as well as helping the business owners incorporate into their financial plan the valuable asset that is their business ownership. Please contact us or call our office today at 904-398-2075 to set up a meeting or call to discuss your financial and tax concerns. As always, planning ahead can help you minimize your tax bill and position you for greater success.