As a dental professional, your first priority is to ensure that your patients have happy, beautiful smiles. But you also have a business to operate, so keeping your finances and taxes in order is a necessity. As you are putting the final touches on your 2021 tax return, now is a good time to start thinking about 2022. The IRS isn’t something most taxpayers need to be concerned about, but many company owners are both small business people and high-wage earners. As a result, you’re more likely to get a call from the IRS than the average small business owner if there’s an issue with your tax return. According to the study, the IRS sent over 3 million notifications in 2020 for maths mistakes on forms exclusively. So now is a good time to start tax planning for small businesses before you get a notification like this, which might lead to a costly mistake.
As a result, getting a grasp on tax planning sooner rather than later is a smart idea, and you don’t have to wait until the deadline approaches. Read more for some strategies for tax planning for small businesses.
No Notable Changes For The 2022 Tax Season
Unlike the tax filing seasons of 2020 and 2021, there are no substantial changes that small companies should be aware of this year. Small firms should make sure they’re paying their anticipated taxes on time and are aware of their tax burden, according to the accountants on the panel. Aside from that, there have been no major changes in tax policy. Over the previous two years, we’ve been an anomaly. Taxes have mostly remained the same for a long time. We’re kind of going back to the ‘before’ days, when there weren’t many changes and you treated your taxes the same way you always did.
What Is A Tax Planning Service?
Tax planning services are full-service options for completing your annual tax filing forms for the Internal Revenue Service (IRS) and, if necessary, state tax agencies. It is a service that will evaluate your tax forms and finish your taxes for you, unlike online and desktop tax prep tools where you handle your own taxes. In-person tax planning services are provided at several local offices. Others provide you with online access to a preparer or team of preparers via a mobile app or a website.
What Types Of People Should Use A Tax Planning Service?
Tax planning services are ideal for anyone who, for whatever reason, does not want to prepare their own taxes. Tax planning for small businesses and well-established businesses is important. It is a service that may be a smart solution for you if you want to save time, don’t know how to manage a difficult tax situation, or just don’t like performing arithmetic or using computers for your money.
It’s vital to know that preparing your taxes manually or with tax preparation software can save you money. Depending on your income and tax complexity, you might be able to file your taxes for free online. It is completely up to taxpayers to deliver IRS-related forms using whatever method offers them the most confidence.
Some Strategies Of Tax Planning For Small Businesses
Here are some strategies for small businesses for tax planning which might be beneficial for your business.
Think about changing your tax status
You have various alternatives for structuring your small firm as a small business owner. As a single proprietor, a partnership, a limited liability company (LLC), an S corporation, or a C corporation, you have several options. For small business owners, your business structure will have an influence on how you file taxes. If your existing business structure has outgrown you in the last year, you may be able to switch to a more suitable one. By submitting Form 8832 to the IRS, LLCs can decide to be taxed like C corporations. Making such an election used to be exceptional because the maximum business tax rate was 35%, but the Tax Cuts and Jobs Act of 2017 (TCJA) reduced the top corporation tax rate from 35% to 21%.
Benefit from new tax laws
The TCJA also established the qualifying business income (QBI) deduction, which allows pass-through business owners to deduct up to 20% of their portion of the business’s profits. However, it is subject to a slew of regulations and restrictions. If their income is too high, owners of specified service trades or companies (SSTBs) lose the deduction. SSTBs are any service-based businesses, except engineering and design companies, that rely on the reputation or expertise of their workers or owners.
To be eligible, your company must demonstrate the following
For a limited time, the CARES Act also changed the regulations for businesses that deduct contributions for unsold goods. Businesses can often deduct up to 15% of their taxable income through food inventory contributions. This cap was raised to 25% of the business’s taxable revenue for 2020 and 2021.
Smaller companies that utilise the cash foundation of accounting and don’t retain inventories are eligible for the deduction, as are corporations and non-corporate taxpayers. This might be especially beneficial for eateries that have been hit hard by the epidemic. The deduction is restricted to the cost of donated food inventories plus half of the profit the company would have made if the donated food had been sold.
Many small firms employ the cash method of accounting in their books and tax returns. The cash procedure requires a corporation to recognise income when it is received and costs when they are paid; in other words, when cash is exchanged. As a result, certain novel tax planning tactics emerge. If you expect to be in a lower tax band next year, you may wish to save money by deferring income until the next year.
When Should You Increase Your Income? On the other hand, accelerating income into the current year may make more sense, especially if you expect tax rates to rise in the near future. In such instances, you could wish to issue your invoice and try to collect payment from your client in 2021, so that you can tax more money at your present rate.
You can minimise your taxable income by opening or contributing to a retirement plan. For both themselves and their employees, business owners have a variety of retirement savings alternatives. You can subtract any payments to a 401(k) plan made before the end of the tax year when you submit your tax return if you set up the plan before the end of the year. The parameters of the plan determine how much an employer can invest.
If you miss the deadline for establishing a 401(k) plan in 2021, you may still be allowed to establish a simplified employee pension plan, or SEP. To set up a SEP, you have time till the due date of your return, including extensions. Not only may you deduct contributions to a 401(k) or SEP, but you may also be eligible for the retirement plan starting expenses tax credit.
Are You Unsure Of How To Submit Your Taxes? Bring Your Problems To Kmk Ventures And Leave The Solution
Tax time Those two words may be terrifying to many of us, especially if it’s our first time managing the complexity of tax planning for small businesses. However, if you work with KMK Ventures, preparing your business taxes doesn’t have to be a nightmare. Tax planning for small companies may save time and maximise savings when it comes to filing taxes with the appropriate tax consultant. When it comes to choosing the best tax solution for you, the level of detail in your organisation makes all the difference. KMK Ventures examines some of the greatest tax service choices available to assist you in making the best decision for your company.