If there’s anything certain in life, it’s to be the taxes. Even within the year 2020 where the pandemic has turned the planet the wrong way up , tax filing for businesses may be a certainty that has got to be carefully complied with. However, the upside of 2020 is that a business can make use of tax provisions and privileges granted by CARES Act to scale back the damage caused by the loss of business thanks to the pandemic.
Add reliable and essential tax strategies you’ll reduce your liabilities and save sizeable money i.e. once you need it the foremost in 2021. If you’re a replacement business trying to work out the way ahead for tax season 2020-21, Kayabooks is here to assist you. During a series of blog posts starting with this tax planning strategies, we are getting to assist you figure the simplest thanks to make tax savings for 2020-21. So here are 5 tax planning strategies for an efficient tax season:
Claim Tax Deductions for Bad Debts:
Every business at some point in time suffers from debt which is that the amount of uncollectable amount that’s owed by the purchasers for the products and services rendered by your business.
Businesses’ Accounts Receivables aren’t always wholly collected and are rarely settled thanks to sort of reasons; sometimes there arise irreconcilable differences on payments Accounting Services in New York, few customers may evade the payment even after tireless perusal by your recovery department. These bad debts can include loans to suppliers or clients, sales to customers on credit or guarantees on business loans.
While you already lose the quantity you’re owed paying taxes on the quantity you’ve got not collected becomes a burden if your business is rife with bad debts. However, you’ll lower our burden by writing off these bad debts and may claim a tax write-off. You write off these bad loans and brought off the income at the year’s end if you’re using the accrual method of accounting.
Prepare assets ageing report back to list out all the purchasers and total uncollectable amount by the top of the year & include this total debt on the income tax return you file. However, you’ve got to attend until the top of the year and need to make all efforts to gather the quantity to determine the quantity as a nasty debt and this is often only possible if you’re using accrual-based accounting method.
Writing down or Writing off Inventory & Obsolete Equipment to scale back Tax Liability:
Obsolete Inventory has always been a pain for the business: it provides no value and takes up space prodding business to lose money just by holding to them. Yet they will be still useful to scale back your liabilities in multiple ways, be it they’re completely obsolete or got their value hit thanks to change in market demands, damage or maybe natural deterioration over time, using write-offs or write-downs respectively.
Equipment or machinery or the other company property is taken into account obsolete when it’s not used and is taken out of the list of assets from the company’s record. This asset are often physical (equipment, machinery or vehicle), or maybe technological or technical asset that has been updated by a more modern model.
You can make an inventory of all the equipment and mark them as obsolete, damaged and damaged yet usable category supported their working condition. Obsolete equipment are often listed under the write-off section, equipment that’s damaged yet are usable are often listed under the write down section with their reduction in value. The entire amount that accounts to those write-offs and write-downs are often wont to reduce the liabilities.
Time the Expenses & Income Strategically:
Expenses reduce the tax and extra income does attract an additional tax and timing them is that the key to optimize your liabilities to profit your savings. If taking income this year or subsequent is that the choice you’ve got , you’ll time the income supported which year your profit is lower. And when it involves expenses, you’ll shift them to the year when the profit higher and deduction is on the larger side.
You can also consider the income bracket and rate variations to time the income and expenses. If you fall during a higher income bracket or tend to pay higher tax next year, you’ll direct your income into this year and postpone expense to next year, and the other way around . Seek advice from your tax advisor with clear information on the tax rates and deductions that are sure to change with CARES Act. So next two tax strategies you’ll put in situ for your business in 2020 are closely associated with the CARES Act.
CARES Act & Tax Implications:
The economic disaster befell on the companies round the world has pushed the planet into a brink of recession with most business suffering huge losses. And CARES Act with relief packages, tax benefits, Pay check Protection Programmes and quick business loans was brought in situ to assist American businesses and households stay ashore during the pandemic Online Bookkeeping Services. additionally to Economy Disaster Injury Loans, Pay check Protection Programs that provide the required help to business continue their operations and payroll, CARES Act has also provided tax benefits for businesses.
4&5. NOL Privileges, Increase in Business Interest Limit:
If you’re a business that has been impacted by the pandemic there are many ways you’ll enjoy the CARES Act to offset your damage with tax benefits. for instance , the CARES Act provides a 5-year Net Operating Loss deduce for tax payers helping them to profit from the tax refunds. For the losses caused during the pandemic (applies for 2018-2020) internet Operating Loss of the business are often wont to offset hundred per cent of the taxable income and therefore the loss generated in 2020 are often considered to acquire back the taxes paid by the business in prior years. Amount of interest which will be deducted in also increased from 50% from 30% of the adjusted taxable income for 2019 &2020.
Add this to the deferral of employee Social Security tax, businesses can provides a boost to the income and reduce their liabilities comfortably, but as long as they need any additional help from tax professional well versed and experienced within the new tax rule and provisions for the year 2020. At Kayabooks, we’ve been helping many small and medium businesses enjoy tax provisions to enhance their savings and may assist you too. Additionally to offering Remote Bookkeeping, Accounts Payable, Credit & Bank Reconciliation & Complete Remote Accounting, our back-office firm is additionally offering tax filing for little and medium business for years now.
