It’s going to take us many weeks to digest everything in this massive omnibus of a relief bill that the President signed on Sunday night.
And with year-end barrelling at us (2021 is on FRIDAY), it’s unlikely that we will be able to make substantive action on your behalf THIS WEEK.
That doesn’t mean that we aren’t already diving into the thing — we are — but just that we are prioritizing year-end matters for our clients this week.
If you need to reach us, we’re here: 360-424-1040
Please do have patience with us. Because of the volume of client requests this time of year (on top of family and holiday-related disruptions), we’re not always able to respond as quickly as you might need.
But I did want to quickly highlight some provisions of this massive bill that apply to Skagit County SMB’s, and about which many will be glad about…
- This is BIG: the deduction of business expenses paid for with forgiven Paycheck Protection Program loan proceeds is now ALLOWED. This has been a raging debate among tax nerds, and Congress ended the ambiguity in favor of deduction.
- Streamlined forgiveness for PPP loans under $150K. Also a significant development for many — check with your lender about how they want that now to be handled.
- Restoration of the 100 percent business meals deduction for two years to help the restaurant industry (it was 50 percent)
- Extension of the employee retention credit through June 30, 2021 — AND (also potentially significant) … you can now take this credit even if you also took a PPP because of the decoupling of the PPP from any kind of tax credits
Some of these are a big deal for certain Mount Vernon clients, and we’re going to have fun with them on your behalf as we prepare your 2020 taxes.
Ultra Last Minute Tax Moves for Skagit County Businesses
“Every task, goal, race and year comes to an end…therefore, make it a habit to FINISH STRONG.” – Gary Ryan Blair
As I mentioned to my Skagit County family clients, time is short, and some moves do require more than this week to pull off — so I’m restricting myself to those items which you can realistically do something with before the end of the year.
And, again–these are focused on what will apply to your business. If you didn’t get that list for a personal/family return, let me know and we’ll shoot it over to you.
Also, the fact that expenses paid via PPP loan proceeds are now deductible might affect these calculations for you.
If you want us to give you quick advice, shoot an email using the link at the top of the page, or use this:
1) Buy Supplies in Advance (to increase expenses and offset income)
How much disposable equipment do you expect to use in 2021? Order it now so the cost is deductible in 2020 if you need to offset income. Buy what you think you’ll need for the coming year, as long as you have the space to store it. This is especially easy to do with software, information courses, or other subscriptions that you know you want to keep.
A word of caution: Under a 12-month rule, you cannot deduct prepaid expenses that run more than the end of the year following the current year. For example, if you prepay a three-year subscription to a trade journal, the cost is deductible over three years (not just one).
2) Work Now, Bill Later
Instead of sending an invoice immediately so you’ll receive payment this week, consider waiting until next week. This will ensure that payment is received in 2021, and taxes on the income are deferred for another year. However, it may make sense to adopt the opposite approach — bill immediately to receive the income this year.
3) Get Ahead On Other Vendor Costs
You may have bills piled up that are not due until 2021. If you pay them now, you can deduct the expenses in 2020. Don’t have the funds in your bank account at the moment? Consider putting the expenses on your business credit card if the vendor or other party allows it. Costs charged to credit cards before the end of the year are deductible this year even though the credit card bill isn’t due until 2021.
I do hope these help — and remember that we’re always here to help!
Padgett & Padgett, PLLC CPA
Feel free to share this article with a Skagit County area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.