With the ongoing challenges of Covid-19 and legislation related to the pandemic flowing into 2021, it can be tough to stay on top of the changes. Here are some thoughts as your business navigates the tax landscape.
2021 marks the 2nd year for the 1099-NEC to report non-employee compensation. This year the form is in a new format. Reporting needs to be completed on or before January 31, 2022.
In 2021 & 2022, you can deduct 100% of business meals at restaurants. This is up from 50% and is in place to help the recovery of local restaurants.
Understand the Impact of the Paycheck Protection Program (PPP)
Recent law changes make your PPP loans and EIDL advanced payments more advantageous. Pay special attention to ensure you receive the full benefit of the loan forgiveness rules.
Extension of Many Business Credits
Recent legislation extends many popular business credits. Too many small businesses miss out on this area because they are unaware of the benefits.
– Work opportunity credit
– Paid family and medical leave credit
– New markets credit
Plan and Implement Tax Savings Strategies
One of the key tools available to your business to manage taxable income is the ability to expense capital purchases through section 179 or bonus depreciation fully. Review your options in this area throughout the year.
Understand Your Qualified Business Income Deduction (QBI)
Make moves to ensure you maximize your QBI. Remember, the deduction is often limited by the amount of your payroll. So, if you’ve had to lay off employees due to the pandemic, a new deduction forecast may be in order.
Get Your Documentation in Order
Remember throughout the year it is especially important to:
– Properly document all of your deductible business meals
– Create and maintain travel logs for business use of vehicles
– Ensure all documents are documented and meet the ordinary and necessary threshold for deduction
Whatever your situation, don’t hesitate to ask for help. Let us navigate the changes in tax law together and how it impacts your business so you can concentrate on running it.