Tax Tips
Marietta Z. Courtney, CPA, MST owner of Courtney CPA, P.C.
Contact us with any questions or for more information.
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Tax Planning for Businesses
Q. What is Tax Planning?
A. An analysis with the goal of helping you keep more of your hard earned money. It’s a tool to be used to help you make sound business decisions and minimize your taxes. Tax Planning considers several years and includes looking at what tax brackets you will be in to try to realize income in lower tax bracket years and deduct expenses and losses in higher tax brackets years.
Q. Is it something only big companies do?
A. No. Everyone can benefit. You work hard for your money: going to trade shows, networking events, increasing your visibility, blogging, etc. You need this information to help you decide on your action steps. If you do nothing with it, its what the federal and state governments will tax you on and then there will be less money available for the business.
Q. Is it expensive?
A. The purpose of tax planning is to save taxes. The service should pay for itself. Start by doing an analysis yourself. Review tax returns to understand your tax situation. Then talk to your CPA about your results so you can decide on appropriate action steps together.
Q. Do I wait until the end of the year?
A. If you wait, it may be too late. The goal is to determine what you can do in 2021.
Example for a cash basis business: For Discussion Purposes Only
1. Determine your Net Income (Profit) or Net Loss – The total income for the year of your business (example- cash received) LESS total expenses (example- cash paid out and you may also have some non- cash expenses such as depreciation).
2 A. Are you left with a Profit ?– are there any items you’ve been meaning to buy for your business, any expenses coming due soon that you can pay before the end of the year, any groups your business was looking to join, did you want to sign up for training or conferences. Talk to your CPA to find out what additional deductions would be allowable.
2B. Are you showing a Loss? Have you had Losses in previous years and could your business be in danger of being treated as a hobby by the IRS? Talk to your CPA to find out if this is a concern for your business, what it would mean and if there is any additional income you can recognize this year.
REQUIRED DISCLOSURES: To ensure compliance with requirements imposed by the IRS, I inform you that any tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.
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Qualify for the Child/Dependent Care Credit and claim Summer Day Camp and Childcare expenses.
Need to reduce the amount of tax that you owe? Well … you may be able to claim a credit if you pay someone to care for a dependent under the age of 13, or for your spouse or dependent who is not able to care for himself or herself. The credit can be up to 35 percent of your expenses. To qualify, you must pay these expenses so that you can work or look for work. Here are some things you need to know:
- The cost of day camp may count as an expense towards the Child and Dependent Care Credit. Keep in mind that the expense for overnight camps do not qualify.
- You must have paid the child and dependent care expenses so that you (and your spouse, if filing jointly) could work or look for work. If you do not find a job and have no earned income for the year, you cannot take this credit.
- You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. If you make payments to your child, he or she cannot be your dependent and must be aged 19 or older by the end of the year.
- If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business.
- If you pay expenses to a sitter at your home or a daycare facility outside the home to provide child care, you may get some tax benefit if you qualify for the credit. You will need the name of the child care provider, the address, the identification number, i.e. Social Security number or Employer Identification Number and the total amount paid.
- If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer will be able to tell you whether your benefit plan qualifies. There are limits to the amount that can be excluded from your income.
Be sure to take advantage of this credit if you are eligible. ___________________________________________________________________________________________________
Here’s a list of helpful IRS forms and publications:
Marietta Z. Courtney, CPA, Courtney CPA, P.C. 