Surviving the pandemic has been uppermost in all business owners’ minds of late, whether they’re running a small business, or a large one, but there can be no doubt that smaller enterprises have suffered the most. One way of helping your small business to outlive the pandemic, is to have effective tax strategies in place, and below are 5 steps for doing exactly that:
Locate and harvest property or equipment losses
Do you have real estate whose value has decreased? Inventory that you haven’t deducted for tax purposes, or receivables that are worth less than what you’re owed? If so, you may be able to dispose of them physically, or check a box on your tax form to help you claw back some cash.
Carry out a cost segregation study
A cost segregation study identifies and reclassifies property, enabling you to claim depreciation over a much shorter period. It can also help you to locate assets that are eligible for bonus depreciation, and which can be immediately deducted at up to 100% of an assets cost. For more detailed advice and guidance on cost segregation studies, seek professional help from a qualified tax strategist.
Qualified improvement property
Thanks to the CARES Act, businesses can go right back to 2018 and take a 100% depreciation on any work that was carried out to improve the interior of non-residential properties. Exceptions do apply, so again, seek professional help from a tax strategist.
Check whether you’ve maximized your depreciation
It might be that you were once eligible for a 100% bonus depreciation on something but didn’t take the full amount, or claim it at all, or you were depreciating over a ten-year period when it could have been seven? Maximizing your depreciation over the years can help add up to a significant amount in tax money.
Get help from a tax professional
With all the rules surrounding the proper timing of assets and liabilities, it can be beneficial to seek help from a small business tax professional, as they’ll know the ins and outs of a variety of possible deductions, from compensation accruals, payroll taxes and prepaid expenses to advance payments, and many more. Even if amounts are accounted for differently on your business’s books, deductions may still be available, and as this is a particularly complicated area for tax planning, it really does pay to get professional help.
While there are no guarantees that any of the above tax strategies will be beneficial for your small business, it’s worth consulting with a tax professional to see if existing tax laws, coupled with any coronavirus stimulus, could help you not only survive the pandemic, but thrive through it.