Tax Talk: Tips for Filing in 2021 as an Individual, Small Business or Nonprofit
Tax season can be a challenging period to navigate for individuals, small businesses, and nonprofit organizations. New financial factors created by the COVID-19 pandemic are making this filing season especially unprecedented given the various stimulus and unemployment programs that were launched in the last year.
To help navigate through this unique time, our Community Conversations Series took a deep dive into strategies and tools we can all use to get the most from our 2020 tax returns and stay financially prepared year-round.
We were joined by a panel of accounting and legal professionals to help share tips, develop resources, and answer community member questions. Whether you are filing a W-2, own a small business, or are somewhere in between, there was plenty of helpful information shared to make sure you feel prepared for the April 15 deadline (and beyond!)
Check out a recording of the session below along with additional tips and resources from our panelists!
PANELISTS
Michel Valbrun
President
Navigating this Unusual Tax Year
The COVID-19 has caused major social, economic, and financial changes in communities around the world. As a result, this year’s tax season features some unusual factors that require special attention. Our panelists shared some insight:
Research the latest COVID-19 relief stimulus news to determine if your 2020 tax filing could impact your eligibility.
Calculate any unemployment payments you received in 2020 as these are taxable at the federal and sometimes state levels.
Talk with a tax professional about what special considerations may need to be made for your 2020 filing
Bonus Tip: If you need to file multiple years worth of tax returns, gather as much financial information as you can from those years and consult a tax professional to complete a 2848 Power of Attorney Form and request IRS wage & income transcripts.
Managing Small Business Taxes
If you own a small business or do freelance work on the side, keeping track of your tax obligations should be an essential part of your operations. Though tracking this information may seem complicated, especially if left to the last minute, there are some key strategies you can put in place to help your business’ tax filings run smoothly:
Create an LLC and open a separate bank account for your business to keep personal and professional money separated
Track all of your business’ income, expenses, and other financial transactions. Software like Quickbooks or even an Excel spreadsheet can help keep this information organized
Work with a Certified Public Accountant (CPA) to determine the best tax strategy for you and your business. Depending on your revenue and size, it may make sense to file as an S-Corp or remain a sole proprietorship.
Bonus Tip: Regardless of what type of business you operate, establishing an operating agreement between the company’s owners is a crucial legal step in ensuring the long-term legal stability of the organization and outlining critical rules and procedures.
Staying Prepared Year-Round
Though most individuals only have to file taxes once per year, there are strategies and tools we can all put in place to help us stay prepared and sometimes even save money on returns.
Test some of the various online tax software available and see what fits your needs and budget. If you would rather work with an in-person professional, establish a strong relationship with a CPA in your area who can help create a tax plan that works for you and your family.
Save transaction records from major purchases (like a home, car, etc) or other large financial transactions that may need to be reported in your tax filing
Start preparing your tax return materials early and continue adding information as the various forms are sent to you from your employer, investment firm, etc.
Bonus Tip: When searching for a tax professional to assist you, make sure their experience level, training, and legal abilities match what you are looking for. While many seasonal tax companies may offer discounted services, they often lack the dedicated insight and experience of a Certified Public Accountant.
We appreciate all of our panelists for the insight they shared and for the work they do to support individuals, small businesses, and nonprofit organizations! Subscribe to our newsletter to stay updated on the Community Conversations series!