Small Business Taxes | Strategies For 2021
For the most beneficial small business tax strategies in 2021, business owners should look no further than the professional accounting team at Numerico. We aim to tailor our services to each business, which is why you can leave all of your small business taxes and small business accounting needs to us. You can take advantage of Numerico’s consulting services, too.
Located in Livonia, MI, Numerico helps small business owners in metro Detroit and the surrounding areas for financial guidance. You can trust the expertise from the Numerico team with all of your small business taxes in a timely and professional manner.
What Is My Federal Tax Classification?
Small business tax strategies can vary based on your business’ tax classification. By default, companies with multiple owners pay taxes as partnerships, and single-member Limited Liability Corporations pay taxes as separate entities from their owners. LLCs pay small business taxes differently based on who owns them as well.
For example, single-member LLCs pay different taxes than LLCs owned by S corporations, trusts, or other LLCs. Each LLC member will also receive both profits and losses of the LLC as they pass through to their tax returns. An LLC can even pay taxes as an S corporation or C corporation by submitting IRS form 8832. Numerico can help clarify any federal tax classification questions to make sure your taxes are filed correctly.
How Does Tax Reform Affect Me?
The act of doing taxes for small business owners can be tedious and frustrating. However, diligent owners who understand the tax reform bill can leverage the tax reform to their benefit. Small business owners can take advantage of deductions like qualified business income deductions.
These small business tax deductions allow LLC members to deduct up to 20% of their business income, though there are some restrictions. High-income members might lose out on the deduction if they own a specified service trade or business like law firms, medical practices, consulting firms, investment managers, performing artists, or accountants.
Leverage the CARES Act
Most recently, small businesses should take advantage of the Coronavirus Aid, Relief, and Economic Security Act, which set several opportunities in motion for small businesses. Net operating companies can now carry losses from 2018, 2019, and 2020 for up to five years under the CARES Act.
The Coronavirus Response and Relief Supplemental Appropriation Act of 2021 tax reform bill also allow businesses to potentially gain credit for up to 70% of the cost of wages and health plans for idle employees. The credit maximum is $14,000 per employee. Numerico is here is help you navigate through all these questions surrounding the CARES Act.
Accelerate Income | Defer Income
If your business uses the cash method of accounting, meaning you calculate income when you receive it and expenses when you pay for them, you may be able to claim deferred income tax to the following tax year.
If you haven’t billed a client for work done in December, you could wait to bill until January to lower your tax bill for the previous year.
If you had lower income than expected and want to take advantage of paying taxes in a lower bracket, you might want to accelerate your income.
Contribute or Set up a Retirement Account
It’s essential to ensure you set aside enough income for your future. Setting up and contributing to a 401(k) retirement plan can also reduce the amount you owe in taxes. You can make deductions for any contributions made to the plan after setting it up.
You may also qualify for a tax credit from setting up your retirement plan. The amount your business will be eligible for totals half of the plan’s startup cost. Your business may receive a maximum credit of $500. Just make sure your company meets the qualifications for the credit.
Numerico | Your Small Business Tax Strategy Experts | Livonia, MI
If you’ve searched for “bookkeeping services near me” or “personal accounting services near me” with no luck, you should try Numerico. We can help you find an accountant, whether you live in Westland, Dearborn, or Livonia, MI.
The Numerico accounting experts can help guide you through the daunting task of taking on your small business taxes. It’s never too early to start thinking about how you will handle your taxes next year. Leave the numbers up to us while you focus on your business.
