2020 Tax Planning Considerations for Businesses

There has been a lot of changes when it comes to your taxes this year – How will you take advantage?  These are some things you may want to consider as you schedule your 2020 business tax planning meeting:

• Like Kind exchange treatment no longer applies to any property except real property. Trades are taxable in the year of exchange.
• 20% 199A Business Deduction – Owners of sole proprietorships, S corporations, or partnerships can deduct up to 20% of net income (excluding investment income and wages/guaranteed payments paid to owners).
  • The 20% deduction is in effect for tax years beginning after December 31,
    2017 and before January 1, 2026
• CARES Act and Paycheck Protection Payments
  • Did your business sign-up for an EIDL or PPP loan this year?
  • While PPP loans are eligible for forgiveness, IRS Notice 2020-32 stipulates that no  deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan. In other words, any PPP loan proceeds that were used for covered expenses are not deductible to the extent that the related loan amount is forgiven. The AICPA and numerous other organizations are urging Congress to draft new legislation that would allow taxpayers to take deductions for expenses paid with the forgiven PPP loan. There are tax planning considerations with the PPP loan forgiveness so don’t forget to mention you received PPP loan proceeds during your tax planning meeting.
• The Employee Retention Credit (ERC)
  • A refundable tax credit intended to encourage business owners to keep their employees on the payroll and minimize the number of workers filing for unemployment benefits. The tax credit is equal to 50% of qualified wages that eligible employers pay their employees in a calendar quarter. Qualified employers can earn a maximum credit of $5,000 per employee. Businesses of all sizes are eligible to receive the ERC.
• Emergency Sick Leave Tax Credit
  • If your employees take sick leave for themselves or to care for others due to COVID-19, you may qualify for the Emergency Sick Leave Tax Credit. There are credits available for self-employed individuals as well.

Other Tax Planning Considerations

• Review wages to S-Corp owners/spouses to determine maximum 199A deduction
• Review guaranteed payments to partners to determine maximum 199A deduction
• Try to plan for level taxable income over the years
• Place new business equipment and machinery into service before year end to qualify for bonus depreciation/Section 179 expensing
• Set up a self-employed retirement plan if you are self-employed and haven’t done so yet (most plans need to be established before the close of the calendar tax year)
• Increase your basis in a partnership or S Corporation if doing so will allow you to deduct a loss from it for this year
• Utilize payment of wages to children working in closely held businesses to capture the higher standard deduction for children and fund college
• Review business structure for regular corporations and S-corporations to maximize tax brackets and the 199A deduction
• Schedule a tax planning appointment! A tax planning appointment before year end is the
  best way to maximize your tax savings!

Contact our experts today for more information regarding the payroll tax credits available. As always, we encourage you to speak with one of our experts to discuss tax planning for your specific situation. We’re happy to help.

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