(+ How To Create More Cash Flow Without Working Harder)
Taxes and a tax filing extension can get complicated, especially for entrepreneurs and small business owners.
And with all the financial craziness of the past year, filing your 2020 taxes are as complex as they’ve ever been.
In fact, the American Institute of CPAs (AICPA) formally petitioned the IRS this year to extend the filing date because of all the extra complications in filling out the right forms.
The IRS finally responded by extending the filing date to May 17.
Unfortunately, this deadline push won’t help many of the people who need it the most. We’ll explain below.
And if you do your own taxes? Beware!
One leading CPA says,
“It’s a bad year to try to do taxes on your own because you need to be with somebody who knows exactly what they’re doing.”
Our mission at Wealth Factory is to help you cut through the chaos so you can keep every dollar you can in your pocket. Legally, morally, and ethically.
Why this is So Critical
Small business owners are often so busy “running their own businesses,” they don’t spend any more time than necessary on “side issues” like taxes.
However, it’s critical to handle your small business taxes correctly, or you could get a nasty surprise from the IRS or other (State or local) tax agencies.
Plus, working on tax strategies (and other cash flow saving strategies) is truly time well spent, even for a busy entrepreneur…
Because every dollar saved on tax goes straight to your bottom line, and it’s the easiest way to find extra cash this year, without working harder or making another sale.
What You Need to Know
- Yes, the Federal tax filing date was pushed back to May 17, 2021.
- However, States are free to set their own dates. Many usually follow the example of the Feds on things like this. But not necessarily, so check with your state to make sure. There’s a list of all state deadlines here.
- If you’re in Texas, Louisiana, or Oklahoma, you have more of a grace period, as the IRS pushed back your deadline to June 15th following the severe winter storms that were declared a disaster by FEMA.
- If you received any stimulus payments or CARES Act money in 2020, they are not included in your gross income, and therefore are not taxable.
- IRS call wait times are currently around 4.5 hours long. So if you absolutely need to get a hold of them, make sure you’ve got an “unlimited” phone plan and other things you can do for half a day.
- Perhaps the most notable thing that could impact you is…
Estimated Payments for Small Business Owners Are Still Due April 15th
If you don’t work for an employer that withholds tax from your paycheck, you should be making quarterly “estimated payments” throughout the year to avoid penalties.
Since the IRS didn’t bump back this estimated payments deadline, it effectively eliminates any benefit of the tax return timeline change for small business owners…
Because in order to calculate your quarterly estimated tax amounts, you need to do your taxes from last year to come up with the minimum amount you need to pay without getting penalized.
And If You’re Filing an Extension…
Even though you may need to calculate your taxes by April 15 to determine your estimated payments for this year…
You can always request an extension to file your taxes. We generally recommend filing an extension every year since it expands your look-back time for filing an amendment in the future.
The IRS says taxpayers who request an extension using Form 4868 will, as usual, have until Oct. 15 to file their returns.
However, if you owe any taxes from last year, they are still due May 17.
Paying them later may result in penalties and interest added.
Beware of Hidden Surprise Taxes
Most of the extra stimulus money doled out over the last year is tax-exempt. At least at the federal level.
State taxing authorities may have a different idea.
For example, the recently passed American Rescue Plan Act makes the first $10,200 in unemployment benefits tax-free for most taxpayers at the federal level.
But most states are considering all unemployment benefits taxable.
So it’s vital to have good tax guidance at the State level to make sure any CARES Act or other stimulus you received is handled properly.
And if you took advantage of the CARES Act provision that allowed you to take up to $100k out of your retirement account?
Well, you won’t have to pay the 10% penalty on that, even if you are under 59 ½. But you will have to add that to your gross income and pay taxes on it.
It’s All a Mess. And Could Get Worse Moving Forward… Here’s What You Can Do.
In addition to this unusual tax season, the IRS is backlogged by more than 7 million returns from last year.
We also have some serious tax change signals from the new administration in Washington.
Even if Congress only implements a small portion of the proposed Biden tax changes, business owners need to brace themselves, because…
Someone has to pay for all the stimulus that’s being handed out, and that burden will likely fall extra heavy on successful small business owners…
And guess who will pay the most?
Those small business owners who are “too busy” to learn about permanent tax-saving strategies and make a plan to put them in place as soon as possible.
So if you want to avoid overpaying on your taxes…
Now is the time to get started on finding long-term tax strategies that permanently lower your taxes for years to come.
For Business Owners Who Want to Save More Cash Flow…
Overpaying taxes is just one of the ways small business owners lose precious cash flow unnecessarily.
We’ve found over the years that the average small business owner is leaking $4,117 per month.
That quickly adds up to $50,000 a year or more of your hard-earned money lost to unproductive expenses and Uncle Sam instead of being enjoyed by you and your family.
The good news is, we’ve got more than 156 cash-flow breakthroughs available here to help you recover every penny you’re losing, starting now.
Don’t be a victim of any policy, timeline, or change the IRS makes. Be proactive, and get your tax strategy dialed in as soon as possible. The difference in your take-home profits could be tremendous.
That’s it for this week.
Build the life you love,
The Builders at Wealth Factory