How to Avoid the After-Tax Blues

Tax season is always a stressful time for small business owners. Seriously, who wants to hand over to the U.S. Treasury what you worked so hard to earn!

Tax preparation takes time away from running the business, marketing products or services, or putting out those fires that always seem to plague small business owners at the worst possible times.

Fortunately, if you have received this email, you’re likely a DLMM customer for whom we’ve been shouldering the responsibility of properly filing your business taxes accurately and on time (thank you!). But, if you’ve received this email because you are a small business owner and a client of ours forwarded it to you, we invite you to subscribe to future issues. Just complete the Need Help? subscription form on our website. 

Investopedia published an article “5 Ways for Small Business Owners to Reduce Their Taxable Income.” They listed several obvious ways:

  • Start a SEP, IRA, Roth IRA or 403(b) retirement plan,
  • Open a Health Savings Account (HSA),
  • Make sure you have the right business structure.

Our favorite advice from this article? Hire a Pro! Dedicate your time to doing what you do best; leave the money matters to us—it’s what we do best, for you. If you receive our newsletter, you are already a small business owner who wants to keep more of your own money or make your money work harder for you. If you received this because it was forwarded by one of our valued clients, your inquiry as to how we might help you and your small business could make a difference at tax time in 2023. 

At DL MoneyMatters, we look out for small business so they don’t need to suffer from the After-Tax Blues.

Small Business Election Effect

Before the election, 81% of small businesses said that the 2020 election would affect their small business — no matter the outcome. According to the report issued by Verizon, small business owners’ concerns ranged from financial viability, social distancing regulations, and the post-COVID business climate. This was a national survey, so it doesn’t necessarily reflect the business climate here in southern Ohio…but as a nation, many of us are interdependent in many ways — whether as suppliers or consumers.

After the election, reality set in that a Biden win coupled with a sympathetic Congress is likely to mean more than COVID concerns. We are looking at the likelihood of the cost of employment rising due to an increased minimum wage from $8.70 per hour ($4.35 for tipped employees) to $15 per hour, plus mandated paid time off (PTO) for employees.

Biden also promised to modify Trump’s Tax Cuts and Jobs Act of 2017, raising the current corporate tax rate of 21% to 28%, and will likely raise the income tax rate for the tax bracket in which most small business owners operate. Plus, we can’t rule out a tax increase on income from capital gains.

Since 2017, CNBC has conducted what they call their “SurveyMonkey Small Business Survey”.  Since the high of 62% in 2017, responses had never dipped below 50 until 2020 (coronavirus). Now that Biden is President, there’s uncertainty among some small business owners, but it’s divided. Republican business owners are more pessimistic than Democratic owners and the earlier confidence from both sides stemming from the assumption that raising taxes on small business would be difficult in a Republican-controlled Senate have been dashed.

At any rate, if there’s one single thing most small business owners have, it is tenacity. Always willing to take risks to achieve their goal, the successful small business owner is so self-motivated and so self-reliant that they can survive anything that comes their way. For those with businesses hit hard by COVID, grants instead of loans would be helpful and for the smaller companies, a Godsend. 

If you have any questions or concerns in these uncertain times, please feel free to call us knowing that our conversations are held in the strictest confidence.

What Small Business Must Do In December

We wish it was about letting our employees and ourselves find time for online shopping (yep, it’s a Covid Christmas this year — forget the Mall). It’s not about wearing red and green to the office and bringing in cookies to share. Or if you work from home as so many of us are doing, it’s not about wearing our comfy ugly Christmas sweater or Santa Socks.

What it is about is getting ready for 2021. Sort of a Christmas list, for business.

The List

Prepare the 2021 budget. Include your monthly revenues and expenses, and a projection of how much you need to bring in next year to remain solvent or hit revenue goals. If the numbers don’t add up, it may be time to shop for additional financing.

Double check SBA Coronavirus Relief Options. Be sure you have asked for or received all the help you can get from the SBA.

Take inventory. Calculate your ending inventory to avoid any surprises starting 2021.

Organize files. Lack of organization can hurt your business, and this is the best time of year to clean up your files so any mistakes from 2020 can be rectified now and not carried over into the new year.

Prepare for Tax Season. Start by understanding your tax filing deadline, then gather and analyze your records looking for tax deductions and credits. Set aside estimated tax payments or determine whether you need a filing extension.

Or, simply let DL MoneyMatters do handle most of this list for you (highly recommended)!

Finally, promise to put 2020 behind you emotionally and get energized for 2021. Do something kind for your employees and for yourself. Get together and set outrageous goals for the coming year. Then take some time off to spend with close family and to celebrate what Christmas is really all about—love, mercy, compassion, and the call for us to share our time, our attention, and resources with others, especially those who need it most.

Merry Christmas!