Everything You Need for Mid-Year Tax Planning
Many business owners and self-employed individuals often set their tax plan and forget about it until they’re required to file. If you own a business, it’s crucial you review your tax plan, evaluate how it’s working, and adjust where you see new opportunities throughout the year. As such, the mid-year tax planning process is imperative for thoughtful and forward-looking business leaders.
As the second half of the year kicks off, here are important mid-year tax planning tips to keep in mind as you close out 2021.
Evaluate Whether You’re Primed to Invest to Create Tax Benefits
After June, you’re in a great position to see whether your forecast about the year’s costs and revenues are on track to be fulfilled. If you see a difference in revenue compared with your expectations, then you might be in a good position to make some investments to benefit your taxes. If you’re making more revenue than you expected, this could be the perfect time to invest in new equipment, real estate upgrades, or other avenues of spending that will count as tax deductions and spring new life into your business.
Evaluate Unexpected Depreciation Costs
An unexpected depreciation cost for 2021 comes from the depreciation on your real estate qualified improvement property (QIP). If you had to make changes to your office spaces or buildings to comply with COVID-19 protocols, you likely spent a decent amount of money to ensure each space is safe. As a result, your property values may have changed, or depreciation costs may have hit you harder than anticipated. Both would have immense tax implications for your end-of-year taxes. Doing some back-of-the-envelope calculations now can help you understand how to adjust your current rate of withholding.
Adjust Timing of Payroll Taxes
Another situation that businesses may consider this year is delaying their issuance of payroll taxes. Businesses that are struggling due to the economic slowdown can postpone paying a portion of their required payroll taxes. Your business can choose to pay half of the required social security tax by the end of 2021 and delay the rest until the end of 2022. Self-employed business owners can put off paying half of their self-employment tax by paying half of that total by the end of 2021 and the other half by the end of 2022. These delays can be critical in keeping your cash flows positive during trying times.
Expert Tax Planning & Preparation for Your NJ Business
Ensure your tax plan maximizes profits and enables re-investments with Tobin and Collins. Our tax consultants and financial advisors are ready and able to assist you. Contact us to get started today.