Tax situations for all businesses are not the same. This is the reason every business needs to work out its own unique tax strategy. If you are a smart business owner, you should never make your business taxes feel like a guessing game. In fact, you should always remain fully aware of the most recent updates and then devise an effective strategy which is ideal for your business. Talking about tax preparation in the year 2021, in many aspects, has proven to be much more challenging than the past years in decades – in regard to Covid-19.
Business tax laws are not just complex, but they also continue to change over time. While you should always stay organized and file your taxes on time, keeping yourself up-to-date is even more important.
The Covid-19 pandemic has led to a number of changes including extension in the income tax filing deadline for small businesses. This is to help businesses complete and submit their tax return properly. The usual tax filing deadline for sole proprietors and single-owner LLCs was April 15. However, the IRS allowed more time by extending this deadline to May 17, 2021.
As per the provisions in the American Rescue Plan, the first $10,200 of unemployment compensation will not be taxed. This is a big relief for contractors and sole proprietors among others. The insurance amount under the Affordable Care Act has also been reduced, affecting the premium tax credit. Keep in mind that all these changes are in regard to federal income tax returns. To find out about the state tax filing deadline, you should check out the website of your state department of revenue.
Whether you have launched your first company or run a company for many years, there are different types of federal taxes that may apply to your business. Your tax filing will depend on some key factors such as the type of industry you operate in, number of employees you have, revenue, etc.
The dates for filing income tax returns vary depending on the structure of your business. There are different filing dates for corporations, sole proprietorship, S corporations, etc. If you are a sole proprietorship, your tax filing deadline will coincide with that of an individual taxpayer’s. If you are an S corporation or a partnership, your taxes are due on March 15, 2021. There are various tax filing deadlines for corporations. For state income tax filing due dates, you should visit or get in touch with the tax collection authority in your state.
Businesses can submit their payroll withholdings and unemployment tax payments either on a monthly or semi-weekly basis. Check out your filing status to know which one applies in your case. Also, employers are required to properly keep records of deposits as well as give away the year-end tax documents to employees. To enable employers to give increased paychecks to their employees, the former had the option to postpone holding back the employee’s share of payroll taxes. If you held back payroll taxes between September 1, 2020 and December 31, 2020 (the given option), you are required to pay it by April 30, 2021.
These taxes don’t apply to all businesses. The excise taxes need to be paid by businesses such as retailers, manufacturers and trucking companies. Some good examples of products that are subject to these taxes include fuel, tobacco and alcohol. Businesses that are subject to excise tax can pay the tax on a monthly, quarterly or annual basis. For detailed information on this, you should check out the Publication 509 of the Internal Revenue Service.
Small businesses are required to deposit their employment taxes on a monthly or semi weekly basis. To find out which tax schedule fits in your case, you should check out your tax liability as reported on Form 941.
Apart from depositing the employment taxes, employers also need to report their payroll withholdings either quarterly or annually. For this, employers should use any of these IRS Forms – 941, 943, 944 and 945. Form 941 should be submitted by April 30, July 30, October 29, 2021 and January 31, 2022. For all other forms in the 940 series, the deadline remains to be January 29, 2021.
Many businesses such as sole proprietors, partnerships and S corporations need to pay estimated taxes on a quarterly basis. Businesses can calculate the amount of estimated taxes they must pay using the worksheet Form 1120-W. The deadlines for filing these taxes for corporations are as follows.
Your business is subject to estimated taxes on two conditions – a) if you do not have taxes held back from each paycheck or b) if you do not have enough amount held back from each paycheck.
The tax credits and deductions a business takes can affect their tax situation in a positive way. If your business has a greater deal of expenses and deductions than normal, this could benefit you in a big way, as it will bring down your business tax rate in 2021. It has been found in surveys that the average business owner ignores tax credits and deductions and ends up overpaying their taxes. Tax professionals suggest that you never underestimate your expenses.
As a result of the coronavirus outbreak, business taxes in 2021 have undergone some changes. To reduce the pandemic’s impact on the economy, the US government took various tax-related measures.
To help small businesses survive and stay afloat, the US government came up with the Paycheck Protection Program (PPP) under the CARES Act. The emergency loan is forgivable, provided the funds are spent on payroll, rent, utility bills etc. If you borrowed a business loan under this scheme and it was forgiven, the loan amount will be regarded as non-taxable income for 2020.
The US Small Business Administration (SBA) broadened the ambit of the Economic Injury Disaster Loan (EIDL). This measure was taken to assist businesses that were affected due to the pandemic. The EIDL is taxable. If you received this loan, you will be required to pay taxes on the same.
Due to the coronavirus pandemic, it became difficult for most businesses to retain their employees. The Employee Retention Tax Credit (ERTC) is meant to help businesses deal with this particular problem of retaining staff members. Employers that qualify for this tax credit are eligible to avail themselves of a tax credit equal to 50% of qualifying wages, up to $10,000 per employee. The validity period for this credit is between March 13, 2020, and Jan. 1, 2021.
Employees or staff members who were infected by Covid-19 needed sick leave. That is exactly what the Families First Coronavirus Response Act does. It requires employers to grant sick or family leave to their affected employees. Employers that took care of these payments are eligible for tax credits for 100% of the cost of sick-leave pay, or family-leave pay. Plus, those employers are also eligible for qualified healthcare plan expenses and the employer’s share of FICA taxes for sick-leave expenses they bore under the FCRA.
Multiple changes were made to the CARES Act in a bid to provide relief to struggling businesses. One of these was an increase from 30% t0 50% in the allowable business interest expense deduction. This deduction was on adjustable taxable income and it was available to certain businesses.
The information presented above is an overview of the tax filing deadlines and updates for small businesses. Your company or business entity may also qualify for different types of tax credits and deductions, reducing your tax burden as a result. If you have more questions in relation to business taxes or need professional help to have your business taxes filed in an appropriate and accurate manner, you should head straight to SCL Tax Services, based in the Bronx, NY. We have helped the residents in and near the Bronx, Mount Vernon, Eastchester, Westchester, and Yonkers
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