2020’s End-of-the-Year Tax To-Dos
April 15 is a ways away. But right now, in the midst of the holiday rush, is exactly when small business owners need to take a few important steps ahead of the official tax season.
We know it’s a busy time for many of you. In addition to trying to squeeze every last drop of income out of 2020, you also have to plan, budget and make other preparations for 2021. But until the clock strikes midnight on Dec. 31, 2020, you have time to make the 2020 tax season a little smoother … and a little more fruitful.
Here are a few end-of-the-year tax to-dos you can get out of the way before Jan. 1.
Know Your Deadlines: Depending on what kind of business you run, you might have 2.5 or 3.5 months from the start of the year to file your taxes. Sole proprietorships, single-member LLCs, multi-member LLCs taxed as corporations, and all corporations that end their year on Dec. 31 all have the traditional April 15 shared by individuals. However, partnerships, multi-member LLCs and S Corps must file by March 15.
Get the Family Involved: It’s never too late to make the tax code work for you. Hiring your children has always been a great tax strategy for a number of business structures, including sole proprietorships or single-member LLCs. However, it got even better under the 2018 Tax Cuts and Jobs Act, which allows an employee-child to shelter as much as $12,400 of their 2020 wages from federal income tax. If you pay your child even more, they’ll still pay taxes at a reduced rate. Also, children under age 18 don’t have to pay Social Security, Medicare or federal unemployment tax. So, putting your kids on the payroll can still pay off if you do so quickly — as can these last-minute tax tips.
Get Your Documents Organized: Don’t wait to get your paperwork together. If you don’t already organize your receipts, mileage and other vital business documentation, start doing so. Digitizing these items is one of the easiest ways to stay organized, but even if you’re just dealing with paper, having these in one place now will save you (or your tax preparer) a headache in a few months.
Double-Check Your Payroll Totals: A quick way to get the IRS’s attention is to run inaccurate payroll. If the number you provide on 940s and 941s throughout the year isn’t the same as what’s reported on W-2s, an audit could be in your future. Yes, having to submit an adjusted 940/941 might be a pain, but compared to the alternative, it’s a stroll in the park.
Talk to a Professional Tax Adviser: What’s the best strategy for buying Christmas presents — shopping earlier in the season to make sure you get everything on your list, or waiting until the last minute when many of those gifts might not be available? The same logic goes for hiring a professional tax adviser. If you call now, you’re likelier to find a tax pro with room on their client roster than if you wait until March or April.
Also, remember: Not every tax planner is the same. If you’re looking for more than just basic tax-filing services, get in touch with McManamon & Co., a firm serving small and midsize businesses in a wide range of ways, from long-term tax planning and strategizing to accounting to consulting and so much more.
Set yourself up for success in the new year, whether that’s simply being a step ahead on your taxes, or working with McManamon & Co. to position yourself for massive tax savings in 2021, 2022 and even further in the future. Call us at 440.892.8900 or contact us online.
Tags: accounting, McManamon, small business, small business taxes, taxes | Posted in accounting, McManamon & Co., small business, small business taxes, taxes