Tax season 2020-21 is going to be one of the most complex tax seasons in recent years. Be it due to the updated tax rules and regulations, change in the way business operated, and tax provisions provided by CARES Act for businesses and individuals, the tax planning for the year has to be reconsidered with available options.
CARES Act, for example, provides tax provisions that apply retroactively which demand careful amends of the tax years 2018 and 2019. There are many such updates and tweaks in the tax rules which calls for complex and handy tax season individuals, business and also the accounting firms who play a crucial role in tax preparations. While the previous blogs have helped you with tax planning tips for 2021, tax rules and regulations, this blog is about optimal preparation for the tax season 2021 for both taxpayers and accounting firms.
Tax Season 2020-21 Preparation for Accounting Firms:
Just like every other business in the world accounting did experience rapid disarray in the early stages of a pandemic as the accounting industry was slow to adopt the remote working culture.
But today accountants have become real problem solvers for businesses, be it with their guidance for SMB loans of CARES Act, Paycheck Protection Programs, and Accountant were able to provide the support for businesses and individuals while working remotely. If you are an accounting firm we advise you to continue these remote working model to help with the tax preparation season 2021. And while you consider this option it is fitting to give the right technological support for your team with digital capabilities of accounting automation and cloud-based storage and other accounting software which further help you with a successful tax season.
Agreed, tax preparation work up time-consuming and complex and in other words cumbersome with not enough man-power during these pandemic times. And remote working may not be possible for all the accounting firms, especially with tax preparation. In such cases, you can also outsourcer your tax preparation and filing to remote accounting firms like us, at Outsourced Bookkeeping.
Tax Season 2020-21 Preparation for Individuals & Businesses:
The COVID-19 did play a number on the entire business world-destroying thousands of businesses and ransacking livelihoods of millions of Americans. The economic relief package that constituted business loans for SMBS, emergency grants for business unemployment benefits to individuals and households has helped a lending hand to every section of the society hit hard by the CVID-19 pandemic.
But the major benefits of the CARES Act are made available through unique tax provisions in the forms of rebates, refunds, credits and this is why individuals and businesses must carefully consider their tax-saving opportunities for the tax season 2021 to leverage all the benefits. The first step to prepare for a successful tax season is to be aware of all the tax provisions available to you. While we have discussed the updates tax rules and provisions for the upcoming tax seasons, here’s a quick snapshot of key provisions:
- You can make a higher deduction on your NOLS – CARES Act grants a 5 year carry back period for the NOLs in tax years from 2018 to 2020. And now you can also fully offset the taxable income during these tax years.
- Stimulus money granted under the CARES Act is not going to be classified under the taxable income for 2020. Families with less than $56,844 in earnings can claim refundable tax credits, based on their income, children and filing status.
- Limitation on excess business losses is temporarily waived – For the tax years 2020, 2019, 2018 CARES Act has changed the limitation imposed on the deduction of business losses.
- Business Interest expense increased to 50% of ATI – Allowable deduction for the business interest expense which was 30% in 2018 is increased to 50% for the adjusted taxable income.
5.100% bonus depreciation for qualified improvement property – QIP is now classified to have 15-year depreciation and now the new QIP is allowed to have 100% bonus depreciation. As the said changes apply retroactively to the property placed after 31st December of 2017, you can claim extra depreciation in those tax years.
In addition to the above state, local and federal governments have also provided the businesses with a bit of relief by enabling them to defer various income, sales and payroll taxes, and there are plenty other tax provisions which can be used to make significant tax savings for this tax season 2021. If you are a taxpayer or a business owner looking to leverage the tax provisions available to you for better tax savings you can contact our tax professionals at Outsourced Bookkeeping here: https://outsourcedbookeeping.com