Tax season means business owners are looking for ways to minimize burdensome tax liabilities. Before you speak with a tax professional, there are some things to consider that might affect your business’ finances, when it comes to your tax payments. Here are five tax-prep tips to consider if you own a business.
1. Review Your Tax Status
Many small businesses have a big advantage when it comes to tax deductions. Small business owners can deduct 20% of their qualified business income, but they must have the appropriate tax status. This deduction usually applies to pass-throughs when owners pay business income taxes personally and do not pay taxes through the business itself.
You may want to change your tax status to reap the advantages of this deduction, but it’s good to speak with a tax specialist about the efficacy of this choice before taking the steps.
2. Look at Deductions
If you purchased new or used equipment for your company that was used within the tax year, you could qualify for a significant federal tax deduction. These deductions are intended for small businesses, so they are limited to certain spending amounts.
3. Consider Paycheck Protection Loan Taxes
If you received a PPP loan as part of the CARES Act, you could have the loans forgiven if the guiding criteria are met. Businesses that receive loan forgiveness are not necessarily off the hook for taxes.
The IRS made a designation that payroll taxes (otherwise deductible) are not deductible if funded by a PPP loan. Find out where you stand with your PPP loan, so there are no unexpected financial surprises.
4. Check for Charitable Contributions
Giving back to charitable causes is an important societal contribution a business can make each year, and you may receive a tax deduction. The deduction amount is typically equal to the fair market value of what was donated. Check to see what qualifying contributions you have made.
5. Strategize Business Losses
A business loss is usually determined when the amount of your deductions exceeds your total gross income and gains, which includes a specified amount for a cost-of-living adjustment. There are different types of business losses, such as excess business losses and net operating losses.
The IRS allows you to claim losses for a time if you’re working to make the business profitable. Talk with a tax professional to see which losses you may qualify for and when it makes sense to claim them.
Get the Tax Help You Need
At KDK Accountancy Corporation, we believe in working with you to get the best tax solutions for your needs.
Contact us online or call our team directly at (407) 759-5363 for a free consultation and to learn more about the financial services we have to offer, today!