All Business Owners Should Know Important 2020 Tax Tips

The past year was a challenge for every business owner. While 2020 may finally be in the rearview mirror, it's not quite gone yet. Before you can completely say goodbye to it, you'll need to file your 2020 tax return.

The events of 2020 certainly caused a lot of disruptions, but they also created some important tax planning opportunities for business owners. Whether you're working with one of the excellent business accounting firms in Las Vegas or you're considering filing your own taxes, there are some things you should do as soon as you can. Start with these five tips:

1. Revisit Your Estimated Tax Payments

When the economy unexpectedly shut down, many business owners found that they didn't have the extra cash available to make their usual estimated tax payments. While making lower payments may have helped you get over the hump, if you've underpaid, you'll likely face Federal and state penalties.

If you think this is the case, you really need the advice of a business accounting firm in Las Vegas. A professional will help you understand your options and decide whether you may qualify for an IRS waiver.

2. Consider Payroll Tax Deferment

A provision of the CARES Act allows employers to defer payment of their portion of the 2020 payroll taxes until December 31, 2021. At that time, you'll need to pay 50% of the outstanding amount. The remaining 50% will be due by the end of 2022.

While taking advantage of this can give you some much-needed liquidity, you won't be able to take a deduction for these taxes until you actually pay them. This is another planning opportunity that you'll want to discuss with your business accounting firm. Your advisor will be able to help you weigh the pros and cons of taking a deferral, so you can make the best decision for your circumstances.

3. Take Advantage of the Home Office Deduction

If you've moved your business into your home, you may be eligible for a home office deduction. In general, if you rent or own your home and use a portion of it exclusively as your principal place of business, you should qualify.

There's a good chance you can also write off purchases you made to equip your home office. This may include the cost of buying computers, printers, office supplies, office furniture, and even software licenses.

4. Take a Look at Your Interest Payments

Did you take out a loan or business line of credit in 2020? If so, you may be able to deduct your interest payments. To qualify, the money must have been used to cover "ordinary and necessary" business expenses, as outlined by the IRS. Do your research to find out more or discuss this with your tax advisor.

5. Max out Your Retirement Plan

If you're self-employed and have an IRA or a SEP (simplified employee pension) account, you have until your file your taxes or the 2021 tax filing deadline (whichever comes first) to make contributions. If you have the extra funds, consider maxing out your retirement plan. This will lower your 2020 taxable income.

Explore Business Accounting Firms in Las Vegas

As one of the most reputable business accounting firms in Las Vegas, Fair, Anderson & Langerman is here to help you navigate unfamiliar territory when it comes to your business finances. We'll walk you through all of the 2020 tax tips and help ensure that you don't pay a penny more than you need to. Contact us at 702-870-7999 to learn more.