Tax Changes for Small Businesses
In 2020, new laws, such as the Affordable Care Act and the Small Business Jobs Act of 2020, created or expanded deductions and credits that small businesses and self-employed individuals should consider when completing their tax returns and making business decisions in 2021.
Health Insurance Deduction Reduces Self Employment Tax
With the enactment of the Small Business Jobs Act, self-employed taxpayers who pay their health insurance costs can now reduce their net earnings from self-employment by these costs. Previously, the self-employed health insurance deduction was allowed only for income tax purposes. For the tax year 2020, self-employed taxpayers can also reduce their net earnings from self-employment subject to SE taxes on Schedule SE by the amount of self-employed health insurance deduction.
- They were self-employed and had a net profit for the year,
- They used one of the optional methods to figure net earnings from self-employment on Schedule SE, or
- They received wages from an S corporation in which the taxpayer was a more-than-2-percent shareholder.
During the tax year 2019, the most recent year for which data is available, the self-employed health insurance deduction was claimed on 3.6 million tax returns, reducing taxpayers’ adjusted gross incomes by $21 billion.
In general, the Small Business Health Care Tax Credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
Small businesses can claim the credit for 2020 through 2013 and for any two years after that. For tax years 2020, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2021, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.
The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.
Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return.
General Business Credit for Employers
The general business credits of eligible small businesses in 2020 are not subject to alternative minimum tax The new law allows general business credits to offset both regular income tax and alternative minimum tax of eligible small businesses as described in Section 2012 of the Small Business Jobs Act. The provision is effective for any general business credits determined in the first taxable year beginning after December 31, 2009, and to any carryback of such credits. For a list of the general business credits, see Form 3800.
For tax years beginning in 2020 and 2021, small businesses can expense up to $500,000 of the first $2 million of certain business property placed in service during the year.
In general, businesses can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property, after the relevant section in the Internal Revenue Code.
Section 179 property is a property that you acquire by purchase for use in the active conduct of your trade or business, including:
- Tangible personal property.
- Other tangible property (except buildings and their structural components) used as:
- An integral part of manufacturing, production, or extraction or furnishing transportation, communications, electricity, gas, water, or sewage disposal services;
- A research facility used in connection with any of the activities in (1) above; or
- A facility used in connection with any of the activities in (1) above for the bulk storage of fungible commodities.
- Single purpose agricultural (livestock) or horticultural structures.
- Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.
- Off-the-shelf computer software.
Section 179 property generally does not include land, investment property (section 212 property), property used mainly outside the United States, property used mainly to furnish lodging and air conditioning or heating units.
The Small Business Jobs Act (SBJA) increases the section 179 limitations on expensing of depreciable business assets for tax years beginning in 2020 and 2021 and expands temporarily the definition of section 179 property, for tax years beginning in 2020 and 2021, to include certain qualified real property a taxpayer elects to treat as section 179 property. Qualified real property means qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.
The $500,000 amount provided under the new law is reduced, but not below zero if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2 million.
For tax years beginning in 2021, the maximum amount is $125,000; before the enactment of the 2020 tax relief legislation, it was set at $25,000.
Depreciation limits on business vehicles
The total depreciation deduction (including the section 179 expense deduction and the 50 or 100 percent bonus depreciation) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2020 is increased to $11,060. The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2020 is increased to $11,160. If you do not take any bonus depreciation for the passenger automobile, truck, or van you use in your business and first placed in service in 2020, the maximum deduction you can take for a passenger automobile is $3,060 and for a truck or van is $3,160.
Generally, businesses can take a special depreciation allowance to recover part of the cost of qualified property placed in service during the tax year. The allowance applies only for the first year you place the property in service.
Businesses that acquire and place qualified property into service after Sept. 8, 2020, can now claim a depreciation allowance of 100 percent of the cost of the property. The property must be placed in service before Jan. 1, 2020. Businesses that acquire qualified property during 2020 on or before Sept. 8, 2020, can claim a depreciation allowance of 50 percent of the cost of the property. The property must be placed in service before Jan. 1, 2020 (Jan. 1, 2020 in the case of certain longer production period property and for certain aircraft.)
The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. The types of property that can be depreciated are described in the instructions to Form 4562.
New Laws Could Impact Your Taxes
Contador público en Miami demuestra su guía lo ayudará a planearlo todo, preparándolo para el éxito. Guía de Planificación Financiera de Pequeñas Empresas Para el Año Nuevo. Leyes fiscales para las pequeñas empresas para el próximo período. Consejos de planificación fiscal para pequeñas empresas de fin de año 2020. Pasos para constituir una empresa.
Conduct market research. Market research will tell you if there’s an opportunity to turn your idea into a successful business. Then hire an accountant in Miami. Write a business plan. Fund your business. Pick your business location. Choose a business structure. Choose your business name. Register your business. Get federal and state tax IDs.
Probablemente sea una buena idea que la mayoría de los propietarios de pequeñas empresas se concentren en el núcleo de su negocio, como vender ropa o diseñar sitios web y utilizar expertos Contador Público para ayudarlos en asuntos financieros. Según el IRS, más del 90% de las pequeñas empresas utilizan contadores para preparar sus declaración de impuestos, algo de lo que puede estar muy consciente durante la temporada de impuestos. Pero la declaración de impuestos de impuestos no es la única razón para utilizar un contador (Accountant o CPA en Inglés)
Income statement (also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement, or statement of operations) is a company’s financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the “bottom line”). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.
Un plan de pagos es un acuerdo con el IRS para pagar los impuestos que adeuda dentro de un plazo de tiempo ampliado. Debe solicitar un plan de pagos si cree que no podrá pagar sus impuestos en su totalidad dentro del plazo de tiempo ampliado. Si califica para un plan de pagos a corto plazo, no será responsable de un cargo administrativo. El no pagar sus impuestos cuando se vencen puede causar la presentación de un aviso de gravamen por el impuesto federal y/o una acción de embargo del IRS. Consulta con Contador Publico en Miami.
How to read a balance sheet In financial accounting, a balance sheet or statement of financial position or statement of financial condition is a summary compiled by the Accountant of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities, and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a “snapshot of a company’s financial condition”. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business’ calendar year.