2020 Taxes – What You Need to Know
Normally the US tax deadline would be nearly upon us. However, the IRS issued some rare good news this year: the 2020 tax deadline has been extended to 5/17/21!**
So if you haven’t already filed your small business taxes for 2020 there’s still time. We’re providing you some more last minute reminders and tips to get ahead of your filing.
Things to Remember
-As noted above, the new tax filing deadline is 5/17/21. However, it’s best not to wait until the last minute, especially if you’re getting a refund. Even if you owe the IRS, waiting until the last minute can mean having difficulty scheduling an appointment with a tax professional. If you do your own taxes, it can mean a time crunch that you may not be prepared for, unnecessary stress, and careless mistakes.
-If you are the sole proprietor of your business, in a partnership, or an S Corporation shareholder, you may have to pay quarterly estimated taxes. Not sure if you owe estimated taxes? The IRS website provides you with all the information you need to make that determination.
-Quarterly estimated tax deadlines are due April 15, June 15, September 15, and January 15.
-Most small business owners pay self-employment tax. This tax is on your net earnings from self-employment and goes toward your Social Security and Medicare obligations.
-If you sell internationally, you need to educate yourself on international taxation and regulations. Working directly with a qualified tax professional ensures that you’re filing appropriately and being taxed at the correct rate.
-SALT Cap: Effective in 2019, you can only deduct up to $10,000 in state and local property and income taxes. There is also a significant (20%) deduction for pass-through and corporate businesses. There are limitations on service-based businesses like law and accounting firms that make more than $315,000 per year ($157,500 if single).
-The first-year bonus depreciation deduction is 100%. This means that businesses that make eligible equipment and property purchases can deduct the amount of the purchase price up front in full as opposed to deducting a portion of the expense each year.
-C corporations receive a lower tax rate from 35% to 21%.
What Can You Claim?
Rent. If you rent or lease your office space the amount is 100% deductible.
Home Office Expenses. This applies if there is a dedicated workspace in your home that is SOLELY used for your business.
Transportation. You can deduct operating costs for your vehicle if used for business purposes or take the simple deduction for mileage ($.58/mile for 2019).
Advertising. Materials such as business cards, fliers, and digital marketing costs are all deductible.
Utilities. You can deduct expenses for heat, internet use, landlines, electricity, and water.
Business Travel. This includes flights, lodging, ground transportation (taxis, Uber, Lyft, and public transportation), meals, and the cost of essential business related materials (for example, the cost of using a business facility’s electronic equipment, printing, copying, workspace, etc.)
Employee Expenses. Salaries, retirement funds, and educational offerings are all deductible expenses.
Need to know more but not sure where to go? Try the resources below for the most accurate and up to date tax information.
**It is important to note that the 2020 tax deadline for C Corporations is still 4/15/21.**