Your Most Trusted and Valued Financial Advisors

Tax Tips for Your Business

November 18, 2021

Here are several tax tips to help your business be more tax-efficient both now and in the future.

  • Take a fresh look at your business structure. Analyze each form of business entity to determine if switching to a new structure would potentially benefit you over the next several years compared to your current structure. This will be especially important should Congress pass new tax laws impacting small businesses. Remember to explore business entity types beyond the more well-known structures of C and S corporations. There are partnerships, sole-proprietors and others that may be a good fit for your business.
  • Use of standard mileage the first year a vehicle is in service. Your business can use either the standard mileage rate method or the actual expense method to deduct vehicle expenses. The good news is that you can go back and forth using either method depending on which one gives you the biggest deduction during a particular year. But to have this flexibility, you must use the standard mileage rate during the first year a vehicle is placed in service.
  • Defer income and accelerate expenses (or vice-versa!). You might be able to manage your business’s year-end taxable income to minimize taxes between the 2021 and 2022 tax years. The general rule for cash basis taxpayers is that you don’t have to report income until you receive the cash. To take advantage of this strategy, send out certain invoices closer to the end of 2021. To accelerate expenses, look ahead to bills that will be due in January 2022 and consider paying them with checks several days before year-end. However, if your business saw a substantial decrease in revenue in 2021, you may be better off accelerating income and deferring expenses.
  • Create a smart plan for paying estimated taxes. Generally, the amount of estimated taxes paid is based on the preceding year. For example, if 2021 was a less profitable year for your business, you could potentially pay a lower amount in estimated taxes during the 2022 tax year to free up cash during the year. You would, of course, need to pay the balance when you file your 2022 return in 2023.

These are just some of the tips that can save your business in taxes both now in 2021 and into the future. Please call to discuss these or any other tax matters.

Follow us on Facebook Follow us on LinkedIn Follow us on Twitter