2021 Tax Season - Get ready with these Tax Planning Opportunities for your Business

This year hasn’t been great for most of us, and that’s one of the reasons why entrepreneurs should start looking ahead to 2021 and get things back on track.

The good news is that a new year will be here pretty soon, offering something of a fresh start. While there are no guarantees as to what 2021 will bring, there are still ample opportunities to start planning for a stabler, more prosperous, possibly even more normal year.

In our previous post "2021 Tax Season - Get ready with these Tax Planning Opportunities for Individuals" we shared with you Tax Planning Opportunities for Individuals and now we are going to focus on what businesses should be paying attention to reduce their taxes. Let’s go!

- If you had any business loss in 2018 or 2019, some changes made by the CARES Act retroactively allow taxpayers to carry those losses back 5 years. If you had an NOL in 2018 or 2019, it might be appropriate to review your situation to determine how this law revision will affect your prior returns and your 2020 situation. 

- If you are working as Shareholder in an S-Corporation, you may not be aware of the IRS’s “reasonable compensation” requirements, which can influence your Section 199A (qualified business income) deduction and your payroll taxes. 

- If you got a Paycheck Protection Program Loan from the SBA, you will need to apply for loan forgiveness, if you haven’t already. Even if forgiveness happens in 2021, as of now, you still can’t claim the expenses paid with those funds. (We are waiting for more clarification on this subject)

- If you had a Large Capital Gain in 2020, you may want to consult with us about investing in a Qualified Opportunity Fund (QOF) to defer the taxable gain until 2026. Unlike Section 1031 tax-deferred exchanges, only the profits need to be invested in a QOF, not the entire proceeds from the sale that resulted in the capital gain.

- A final tip: Make sure your 2021 business plan isn’t merely about the bottom line. Yes, you obviously need to maintain profitability, but one of the best ways to do that is to make sure your employees have everything they need to succeed. As you look at your plans for the upcoming year, be sure you’re accounting for things like mental health benefits, supportive company culture and beyond.

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