Year-End Tax Planning for Your Business

As 2021 comes to a close, we’ve gathered some ideas to lower your business taxes, get organized, and to prepare for filing your 2021 tax return.

Identify all vendors who require a 1099-MISC and a 1099-NEC and obtain tax identification numbers (TIN) for each of these vendors, if you haven’t already done so.

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.

Consider accelerating income or deferring earnings, based on profit projections.

Section 179, or bonus depreciation expensing versus traditional depreciation, is a great planning tool. If using Section 179, the qualified assets must be placed in service prior to year-end.

Review your receivables. Focus on collection activities and review your uncollectable accounts for possible write-offs.

Business meals are 100% deductible in 2021 if certain qualifications are met. Retain 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 products. Make sure to keep track of the obsolete amounts for potential tax deductions.

Set up separate business bank accounts. Having business and personal expenses in one account is not recommended.

Create expense reports. Make sure you have expense reports with supporting invoices will help substantiate your tax deductions in the event of an audit.

Organize your records by major categories of income, expenses and fixed assets purchased to make tax return filing easier.

Make your 2021 Fourth Quarter estimated tax payment by January 18, 2022.

Year-End Tax Planning for Your Business

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MBE CPAs PPP2 Qualification resource sheet can be downloaded here.