Small Business Tax Rate Changes And 5 Essential 2020 Tax Season Tips

We are still a few months from tax season, but business owners know the value of getting a headstart on tax filing to ensure everything goes smoothly. This can be challenging for business owners, since there are a lot of daily business must-dos that take time and attention.

You may be in the middle of adopting new technology for your business, or if you’re in the space of ecommerce, Q4 and Q1 are extremely busy. The stress of managing the upcoming tax filing can be too demanding.

There are also new tax updates business owners need to be aware of. For instance, the Tax Cuts and Jobs Act from 2017 may still impact your 2019 tax filing. Other important changes include:

• Family leave tax credit is in effect for the upcoming tax season if your business offers paid time for family leave.
• Interest expense tax deductions are now only for large businesses.
• You can’t carry back business losses from earlier tax years, but you can still do it for 2019.
• Entertainment business expenses are no longer deductible.
• There are changes to the meal expense deduction guidelines.
• Commuting costs can no longer be deducted.
• Federal income is due at different dates for Sole Proprietors and Single-Member LLCs: April 15, 2020
• Partnerships and S-Corporations file March 15, 2020.
• Corporations need to file by April 15, 2020

Of course your state matters when it comes to state taxes. And knowing more about small business taxes by state can be very helpful. Because don’t forget that federal and state tax filings are a must to master before this tax season filings are due.

With those important tax updates for 2020 out of the way, let’s take a closer look at how you can prepare your small business for an easy upcoming tax season.

5 Essential 2020 Tax Season Tips

1. Pay Close Attention To Tax Reforms

When filing taxes for your small business in 2020, it is critical to pay close attention to the latest tax reforms. Why? It is how you must pay your business taxes. Compliance is key. The Tax Cuts and Jobs Act has ushered in a lot of changes for both employees and employers. This also includes business owners without employees. Getting a penalty from the IRS will happen if you are not paying attention to the latest tax reforms, so begin preparing your taxes with new tax reforms at the forefront.

2. Begin Organizing Your Small Business Taxes

Organization is the golden rule when it comes to filing taxes for a small business. The earlier you begin the better. How can you start? Keeping income and expenses separate and in both digital and print form to keep from getting things mixed up is the first step. You can start now even. Simply utilize a free or affordable tax filing system or accounting platform to log income and expenses. This can have a big time impact when getting down and dirty preparing your 2020 taxes.

3. Make Estimated Tax Payments

For small business owners with employees, it is a good idea to make estimated tax payments a few times a year. For example, you can adopt a plan to make 4 tax payments rather than one annual payment by calculating tax credits, adjusted gross income, taxable income, deductions, and more. You can use the tax records from previous years to get a good estimate for the advanced tax payments. And this can also reduce the time you spend each year during tax season.

4. Get Your Business’ Write Offs In Order

By planning in advance, you can potentially save a lot of money on taxes. This means getting your business’ write offs in order. For instance, you can exempt your business from taxes when writing off new equipment rather than the depreciation method most business owners utilize during tax season. Think about what you’ve purchased for your business in 2020 and make it a write off to pay less taxes.

5. Manage Deductibles Properly

From self-employed to employer of a team, you need to track and manage your deductible expenses very well. For the upcoming tax season, make a list of your 2019 deductibles, such as travel, bills, office expenses like rent and internet, and anything else related to your small business. But, be sure you are paying attention to the latest tax reforms. For instance, you can only deduct 50 percent for entertainment and meal expenses for employees and clients.

Wrapping Up . . .

Getting ready for the 2020 tax season is a must for business owners. The latest tax updates and tax reforms small businesses need to navigate this year are important to note. Before February rolls around, get with your accountant or begin strategizing how you can make this tax season easier.