How To Prepare For Tax Planning Success In 2021

How To Prepare For Tax Planning Success In 2021

Putting off year-end tax planning can lower stress levels now, but it sets you up for future failure. Whereas being proactive can help you save money with tax returns, money that can be reinvested in your business (all the more necessary as we head towards an uncertain 2021). 

With Prime Accounting & HR LLC, these savings can amount to $20,000 per year, maybe more! We provide remote accounting, human resources, CFO, and tax preparation services to companies in Denver, CO. Click here to schedule a strategy session. 

In today’s blog, we talk about how you can make 2021 a good tax year by planning early. 

Act Now

Time is money, especially for start-ups. That’s why NOW is always a good time to schedule a meeting with a CPA to avoid the year-end tax rush. Starting early allows you to budget for large tax bills and get your paperwork in order for the next tax season. 

Otherwise, leaving everything until the last minute drives up tax filing costs and takes your focus away from your business. 

Prepare Your Documents

Receipts, invoices, and relevant records should be acquired and stored on the fly. Reaching here and there to tally receipts in front of accounting consultants and tax authorities looks both unprofessional and suspicious. 

Go through your paperwork and identify any gaps in your records. If you notice any missing receipts, you will have time to acquire backup copies. 

Educate Yourself

Hiring or outsourcing accounting and bookkeeping doesn’t mean you stay ignorant about tax issues. 

We are at the cusp of a change of government, which will impact tax laws in the coming year (check out our blog on tax planning under Biden). Things to look out for include:

  • Removal of the Tax Cuts and Jobs Act (TCJA) of 2017
  • Increase in corporate tax rate from 21% to 28%
  • Increase in capital gains to over 40%

In addition, the CARES Act, EIDL, ERTC, and FFCRA will also play a key role in how you plan for taxes in 2021. 

The federal coronavirus relief also introduced the Paycheck Protection Program (PPP), which includes:

  • A second round of loans for small businesses with a 25% reduction in quarterly revenue from 2019-2020 (new businesses, sole proprietors, self-employed, and independent contractors are also eligible)
  • Forgiveness of covered expenses (which may be considered deductibles)
  • Greater funds for food businesses, live venues, theatres, museums, and zoos
  • Extended and improved Employee Retention Credit
  • Tax credit to support employers offering paid sick leave
  • Extension of the New Markets Credit & Work Opportunity Tax Credit (WOTC)
  • Extended clean energy tax credits

As a business owner, you should not only utilize these opportunities but also consult your accountant to discuss the tax implications.

Check Your Calendar

Finally, you should follow your calendar and take note of important dates so that the tax season doesn’t sneak up on you. You should get a hold of your paper trail of expenses and important transactions. And also, mark key tax filing dates for 2021.

For instance, C-Corps should mark April 15th for Form 1120 Tax Return (extended to October 15th). The deadlines for quarterly estimated taxes are April 15th, June 15th, September 15th, and December 15th.

Ultimately, the best way to go about it is to partner with professional accountants. At Prime Accounting & HR LLC, we provide remote accounting, human resources, CFO, and tax preparation services to companies in Denver, CO.

We will help you save money of hiring a full-time bookkeeping staff, and we also have plans for tax filing in the light of likely policy changes in 2021. Click here to schedule a strategy session.