It only makes sense that most small business owners are looking for ways to minimize the tax liability felt by their company. Working with your tax advisor, it is important to know how changes such as Coronavirus Aid, Relief, and Economic Security (CARES) can impact small businesses.
Working with that financial advisor, there are several strategies that can be implemented to help a small business now and potentially deeper into the future.
Different Tax Treatment
First and foremost, it is important to see if your business can potentially qualify for different tax treatment. There are certain things that can be deducted as qualified business income when it comes to federal taxes.
By talking to your tax advisor about changing status, there could be major tax cuts to be had. Those tax cuts, whether for a single year or going forward, can add up to thousands of dollars saved at the end of the day.
Create a Plan for Paying Taxes
Projecting the outlook for the year (and the next five) allows business owners to project their cash flow. It also helps them either put cash aside to pay taxes or take out a line of credit to pay off the taxes that will be owed.
It is also important to know whether those taxes should be paid quarterly or at the end of the year. Your tax advisor should be able to help get the business on a plan that works for its specific needs.
Taking Advantage of Equipment Deductions
When the company buys new or used equipment and has to place it into service prior to year-end, there are federal tax deductions that could be available. Most of these deductions are intended for small businesses.
There are even some kinds of equipment that can take a 100% bonus depreciation deduction depending on the date from which they were serviced. That can mean major savings for small business owners either just getting started or operating on smaller budgets. Every one of these deductions can be an invaluable thing.