A Dozen Year-End Small Business Tax Tips

As 2020 winds down, here are some ideas to consider to help manage your small business and prepare for filing your upcoming tax return.

  1. Identify all vendors who require a 1099-MISC and the new 1099-NEC. Obtain tax identification numbers (TIN) for each of these vendors.
  2. Determine both your 2020 and 2021 tax strategy and whether you are a cash-based or accrual-based taxpayer. Which year benefits from higher taxable income? Where possible, accelerate or delay your sales and expenses. If unsure, target the current taxable year for reducing your net income.
  3. Section 179 or bonus depreciation expensing versus traditional depreciation is a great planning tool. If using Section 179, make sure the qualified assets are placed in service prior to year-end.
  4. Business meals deductibility has changed in recent years. Make sure you have the necessary receipts and note when the meal took place, who attended and the business purpose on each receipt.
  5. Consider any last-minute deductible charitable giving including long-term capital gain stocks.
  6. Review your telephone records for qualified business use. While expense for a single landline out of a home office is tough to deduct, cell phone use for business purposes can be documented and deducted.
  7. Set up separate business bank accounts. Co-mingling business and personal expenses in one account is not recommended.
  8. Create expense reports. Having expense reports with supporting invoices will help support your deductions in the event that you are audited.
  9. Organize your records by major categories of income, expenses and fixed assets purchased to make tax return filing easier.
  10. Review your inventory for proper counts and remove obsolete or worthless products.
  11. Review your receivables. Focus on collection activities and review your uncollectable accounts for possible write-offs.
  12. Make your 2020 fourth quarter estimated tax payment by January 15, 2021.

As always, we hope you find our small business tax tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions related to taking care of your employees or your accounting needs, please contact us directly.