6 End of Year Tax Accounting & Planning Considerations for Businesses

Businesses have unique opportunities to lower tax burdens for themselves and their owners/shareholders. The end of the calendar year is the perfect time to look forward and to make plans to meet your business goals.

6 End of Year Tax Planning Considerations for Businesses:

  1. Did You Place Qualified Improvement Property in Service during 2018, 2019, or 2020?
    Congress made a retroactive law change that allows a business owner to expense the costs of qualified improvement property in the year when it goes into service. Qualified improvement property generally means any improvement to an interior portion of a building that is nonresidential real property, if the improvement is placed in service after the date when the building was first placed in service.

  2. Did You Have a Business Loss in 2018 or 2019?
    The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amended section 172(b)(1) to provide for a carryback of any net operating loss (NOL) arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year in which the loss arises (carryback period).

    If you incurred a net operating loss (NOL) in 2018 or 2019, changes made by the CARES Act retroactively allow taxpayers to carry those losses back 5 years. This entails amending your returns for the earlier years to deduct the loss being carried back, with the purpose of getting a refund on income taxes paid in those years.

  3. Are You a Working Shareholder in an S-Corporation?
    If so, 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.

  4. Did You Secure a Paycheck Protection Program Loan from the SBA?
    If so, you will need to apply for loan forgiveness, if you haven’t already. The SBA forgiveness applications can be quite challenging. This office can assist with completing the application and help you to maximize your forgiveness.

  5. Maximize Tax-Advantaged Retirement Vehicles
    More than 20 different types of pension plans exist, such as the Cash Balance Plan. The more sophisticated plans provide qualifying businesses and individuals to contribute and deduct from their taxes far greater amounts than the simpler plans.

    Major benefits of pension plans include:

    • Tax savings-reduce your federal and state income taxes by providing for your future;
    • Cash flow advantages. Other tax deductions require payment by 12/31/20 to deduct for 2020; but not qualified pension plans that allow for a 2020 income tax deduction for contributions up to the filing of the tax return, including extension. Which means that you have about ¾ of 2021 to make a contribution that you can deduct from your 2020 tax return;
    • Pensions are an “exempt asset”, meaning that if you lose a lawsuit the winner cannot take any of your pension. Even in you file a bankruptcy the Court cannot take a penny of your pension.
  6. Make use of Tax Accounting & Advisory Services
    At Moskowitz LLP, we recognize that our clients look to us for more than defending tax audits, tax law disputes, and cleaning up old tax and accounting problems. We also blend tax and accounting services with strategic planning and consultation. In addition to reducing your taxes, our tax accounting teams support our tax attorneys for use in your legal cases but also to provide you with financial information that tells you what happened in your business, why it happened, and better yet, how to benefit from the information and insights to provide predictive analytics to tell you what is likely to happen to your business finances so that you can realize your business goals.

    Moskowitz LLP is a tax law and accounting firm that has dedicated over 30 years to representing individuals and businesses with civil and criminal tax problems, cleaning up accounting and tax messes, and providing tax and accounting advisory services. We offer practical and affordable tax and accounting solutions.

    Please contact us for a consultation.

    Remember a blog post or email blast is not a substitution for obtaining personal legal and tax consultation. This information is not intended to be legal or tax advice nor does it form an attorney-client relationship between us.