Here are some ideas to lower your business taxes, get organized, and to prepare for filing your 2021 tax return.
As 2021 winds down, here are some ideas to help manage your small business and prepare for filing your upcoming tax return.
- Identify all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax identification numbers (TIN) for each of these vendors.
- Determine if you qualify for the Paycheck Protection Program (PPP) safe harbor threshold that allows you to deduct certain 2020 expenses on your 2021 tax return.
- Based on profit projections, consider accelerating income or deferring earnings.
- Did you know about the great planning tool, bonus depreciation expensing versus traditional depreciation, also called Section 17? If using Section 179, the qualified assets must be placed in service prior to year-end.
- Business meals are 100% deductible in 2021 if certain qualifications are met. Gather the necessary receipts and documentation that note when the meal took place, who attended, and the business purpose of the meal on each receipt.
- Consider any last-minute deductible charitable giving including long-term capital gain stocks.
- Review your inventory for proper counts and remove obsolete or worthless products. Keep track of the obsolete and worthless amounts for a potential tax deduction.
- Set up separate business bank accounts for business and personal. Co-mingling business and personal expenses in one account is not recommended.
- Create expense reports. If you ever were to be audited, having expense reports with supporting invoices will help substantiate your tax deductions.
- To make tax return filing easier, organize your records by major categories of income, expenses and fixed assets purchased.
- Review your receivables. Focus on collection activities and review your uncollectible accounts for possible write-offs.
- Make your 2021 fourth-quarter estimated tax payment by January 18, 2022.