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Simple 2020 Year-End Tax Planning Recommendations for Businesses

When considering additional year-end tax planning ideas, we have been recommending that our business clients consider the following three easy planning ideas that may not utilize cash reserves.

1. Qualified Disaster relief payments to employees, (IRC Section 139)

President Trump signed legislation declaring COVID as a qualifying Disaster under IRC section 139. Therefore, additional payments made to employees for expenses incurred under one of the following categories will qualify as a tax-free payment to the employee:

• Medical expenses not covered by insurance (e.g., co-pays, deductibles, over-the-counter medicines and cleaning supplies);
• Expenses incurred for child-care and tutoring services;
• Expenses incurred to allow the employee to work from home (e.g., the cost of a personal computer, printer, supplies, internet service, etc.);
• Commuting expenses;
• Caregiver and domestic service expenses;
• Funeral expenses; and
• Legal and accounting expenses.

2. 401K tax credits

If you were to start or amend an employer 401K plan for your employees, you may qualify for tax credits for the next three years. Please call your 401K administrator for more details

3. State tax payments as a company deduction

We previously issued a blog by Adam Drewry on how to avoid the SALT limitation by making your personal state tax payments through your related LLC or S corporation on behalf of LLC members or S shareholders. If your business were to make your personal state tax payments directly, you are able to claim the payments as a federal tax deduction by year-end 2020. Therefore, if made you will reduce your federal tax liability for 2020. We are able to assist in making the payments through your business rather than with personal tax vouchers. Call us for assistance.