Published By Faith Stewart at April 8th, 2020
As we near the time most of us dread, when taxes are due, there is a major spin on things this year. The Covid-19 virus has put the world completely on its head, and even the IRS isn’t immune. What does coronavirus mean for taxes, and how can you make sure you keep as much of your money in your pocket as possible? Make sure you take full advantage of all the coronavirus relief options with these 2020 tax tips.
Truly, the coronavirus has affected everything. Currently, the economy is in a constant spiral. There are no signs of letting up any time soon. Before any other 2020 business tax tips, you need to know how Covid-19 affects your tax return this year at the federal level.
First, both individuals and corporations have an extra 90-days to file and pay their taxes this year. Meaning, instead of having to turn in your tax return and pay by April 15, you have until July 15 to do both without interest or penalties. As of right now, interest and penalties will start to accrue on July 16.
As a result, individuals can defer up to $1 million, including self-employment tax. However, corporations can defer federal income tax payments of up to $10 million. Yet, the government is reminding people and businesses to file as soon as possible in case they are getting a refund. Having the cash-on-hand is more necessary now than ever than ever before.
Remember, this is for federal income taxes. Forty-two states and the District of Columbia have state income tax that currently must still be paid by their original deadline. This could change however, so watch for updates.
Now that you know this, here are our top 2020 Business Tax Tips.
It may be too late for 2019 taxes, but be sure you pay attention to credit card rewards if you use business credit cards. You could owe taxes on those. For this year, look at the rewards you have earned and determine if you need to include them on your tax return. Making sure your taxes are accurate is the best way to avoid a lot of unnecessary time in an audit later on.
Few businesses keep their books with paper and pencil these days. Most use some form of accounting software. Many of these will print out tax forms automatically using the data already in the accounting system. Then, all you have to do is review the forms and supply any supporting documentation.
Be sure you know what your system is capable of and use it. Entering accurate information throughout the year and keeping it up to date will go a long way toward ensuring your tax time goes smoothly.
Here are some great options to consider for next year if you find your software is not what you need. Remember details can change, so be sure to check with the company directly for the most up to date information.
Zoho is a great option if automation is your jam. They offer a 14-day free trial. The software compiles IRS compliant audit reports making tax filing much easier. Package prices range from $9 to $29 per month.
Wave has many advantages. The smart dashboard is one of the best. It organizes your income, expenses, payments, and invoices in a way that makes preparing a tax return as quick and painless as possible. In addition, accounting, invoicing, and receipt services are free! Fees for payroll and payment services vary.
Arguably, Intuit Quickbooks is the most widely used small business accounting software on the market. The system is comprehensive and affordable for many, making it a great choice. There is a 30-day free trial and packages range from $12 to $75 per month. Payroll add on options are available.
There are many ways to file your tax return. Still, the fastest, easiest, and cheapest way to do so is online. As mentioned, this goes much faster and is a much smoother process if you have the best bookkeeping software for your business.
Start now scanning backup documentation for next year. Once you are caught up, a few minutes a day can save hours next year. While you are at it, depending on the number of transactions your business does, you could go ahead and scan backup documents for 2019 since you have extra time. It may come in handy in the case of an audit. At the very least, take the extra time to organize all the receipts in your shoebox.
When it comes to 2020 business tax tips, this is the one I would like to stress the most. If you can at all afford it, hire a professional to do your taxes. This is the best way to ensure you keep the most money in your pocket, which is hugely important amidst this coronavirus epidemic.
Looking forward to next year, what can you do to ensure your tax preparation goes as smoothly as possible? There are actually a number of things. They will not help you when it comes to taxes, but they will help you build fundability and business credit as well.
Use an EIN to file your income taxes if you do not already. This is important for a number of reasons, including increasing fundability and helping build business credit. It’s easy and free to get one on the IRS website.
If you are operating as a sole proprietorship or partnership, consider incorporating. Tax wise you can see how functioning as a corporation is going to allow businesses to defer up to $10 million in taxes for 90-days due to the Covid-19 pandemic. There are a number of other benefits as well, including some liability protection. Now more than ever you do not want to be held personally liable for business debts.
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. It will also help you keep them separate from personal finances for tax purposes. Furthermore, it aids in separating your business from yourself for fundability and business credit building.
Beyond taxes, there are several types of funding you cannot get without a business bank account. Many lenders and credit cards want to see one with a minimum average balance. In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments. Studies show consumers usually spend more when paying by credit card is an option.
For now, the best of the 2020 business tax tips is to take advantage of the extra time you have to dig through and find every advantage you can. First, if you can at all afford a professional, it’s worth it. They know what they are looking for and are the best at reducing what you pay in and increasing what you get back.
Next, If that is just simply not possible, take advantage of everything your software has to offer. Make sure you are fully aware of all that it can do, and that all the information entered is accurate and complete. This will help ensure your tax bill is reduced as much as possible, but also that in the case of an audit, you are prepared.