5 Things To Do Now That Tax Season Is Over

1. If you filed for an extension, get on with it.
   Sometimes shop owners need to file for various extensions which means that tax season isn’t actually over. Take advantage of your shop’s down times to get this finished. But don’t wait until the last moment to file the extended return – October 15th will be here before you know it. Also, if you are getting a refund, the sooner you file, the sooner you will get the money.

2. Make sure you have the right amount being withheld.
   Here’s the truth about your refund: It’s a refund of your own money. Receiving a tax refund means you made an interest-free loan to Uncle Sam, which means you had less money during the year to pay off debts, purchase equipment, or earn interest on in savings. Conversely, if you owed money for taxes, you had the opposite problem. It is imperative that as a shop owner, you know where you stand throughout the year as far as tax planning goes. The sooner you have an idea of your shop’s general outlook for the tax year, the better prepared you are to prevent cash flow disruptions by putting money aside if necessary, or making decisions to help reduce what you owe.

3. Make sure your retirement is maxed out.
   In order to be best prepared for the 2021 tax season next year, max out your retirement contributions now. The single best tax deduction you can take is contributing to a business sponsored retirement account. It is a 100% deductible expense and is tax deferred while the asset grows to your full retirement age. If you have a spouse who helps out at all around the shop (see number 4 below), get them on payroll to max out their retirement too.
4. Hire your family members.
   To take advantage of more tax savings, many shop owners want to hire family members to be a part of the family business. However, there is a right way and a wrong way to do this. You can take a business deduction, and as long as the work being performed is “ordinary and necessary,” the IRS won’t likely question compensation paid to a family member. You can even hire your children; just be sure your shop complies with child labor laws. Read more about bringing on family members the right way here: https://www.entrepreneur.com/article/81828.
5. Invest in new equipment.
   Section 179 of the IRS tax code allows shop owners to write off 100% of the cost of a new piece of equipment. If you need a new piece of equipment, and you know you are going to owe taxes, you can plan ahead to make this purchase before the end of the year. (We only recommend this if you were already planning to purchase a new piece of equipment)

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