Can you believe it’s December? 2020 has felt like one of the longest years ever. Are you ready for year-end? I just presented at a Beacon networking meeting (virtual of course!) on tax implications to think about and the main thing I can tell you is that there is so much uncertainty surrounding this year. Be prepared.
At the time of this newsletter, these funds will increase your company’s taxable income and you will need to pay the additional taxes (unless you are a single member LLC). Information changes all the time with respect to these loans, so stay on top of it, call me and work with your tax accountant.
I had a client receive a grant just a few days ago that she applied for back in June. She woke up one morning to $35,000 in her bank account. These delays have been common and you might find yourself in a similar situation. She smartly took $10,000 out immediately to put aside for taxes. The only reason you wouldn’t pay taxes on grant money is if you’re a nonprofit.
With the Democratic-led administration, taxes will change again. Remember in 2018 when taxes completely changed? What is expected is that people making over $400,000 will be put into a higher tax bracket. If this is you, think about expenses. It might make sense to wait until next year to make certain purchases. Talk to me and let’s get a plan together with your tax accountant.
We are going to see a lot more people opting to extend their taxes, but remember, you still need to get your books in order now and pay what you can so you don’t incur even higher penalties along the way.
Working at Home
With 85% of people working from home this year, many people are thinking there must be some way to get a tax benefit. The good news – TEACHERS CAN!!! And if you are in the military or other specified position. And, as far as a home office deduction, only if you are self-employed and file a Schedule C, are you able to get some deduction. So, even if you have been working remotely this year, you can’t take any tax deductions. You also need to pay attention to STATE level income taxes and what state you work in versus live in. This can get very tricky. For instance, let’s say you live in Connecticut and normally work in New York City. Because of the pandemic, you have been working remotely. Do you owe taxes in Connecticut? Or do you owe New York City wage taxes? Or both?
What if you changed locations multiple times this year and spent time working in four different states – worked in Philadelphia, Pennsylvania at the beginning of 2020, then moved to the suburbs of New Jersey for the spring, then to Delaware beaches for the summertime and then in the suburbs of New York for the fall to enjoy the leaves? How much do you pay to each state and even the city of Philadelphia? There are resident and non-resident tax differences and it’s all quite confusing. Talk to your tax accountant. These are the times I’m glad I focus on accounting and not income taxes! Oh, and be sure to file a current W-4 for 2021 as well!!!
I want to wish you and yours a Happy Holidays and a safe, healthy and happy New Year’s Eve.
We have learned how to adjust this year, how to prepare for the unexpected, how to change course, how to ask for help and we will keep growing and learning as we enter 2021. Please reach out to me anytime if you want to ensure your company finances are in order and your growth continues throughout the year!