Tax Planning Strategies For Small Business Owners In Peoria, IL
By Scott McCord, AAMS®, BFA™
The pandemic hit small businesses hard last year, and it is important now more than ever to take advantage of every available resource to help your small business succeed and grow. There are some great programs and tax incentives that can make a big difference for a small business; here are a few in particular we would like to highlight.
The CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted into law in March 2020, provided several temporary relief options for small businesses affected by the COVID-19 pandemic, such as the Paycheck Protection Program (PPP) and different Economic Injury Disaster Loans (EIDL) as well as grants. In December 2020, Congress passed a second stimulus bill that made additional PPP funds available for small businesses. (1) Businesses became eligible to apply for additional PPP funds if they showed a 25% drop in revenue compared to the previous year. You also now have the option of deferring the employer’s portion of Social Security tax payments. (2)
The Healthcare Tax Credit
The Affordable Care Act (ACA) includes tax credits designed to ease the tax burden of small businesses that offer healthcare plans to their employees. In order to take advantage of the tax credit, your business needs to enroll in a Small Business Health Options Program (SHOP) plan. If your business has fewer than 25 employees with an average salary of $50,000 (indexed for inflation beginning in 2014), (3) if you pay at least 50% of your employees’ premiums and you offer insurance to all employees, then your business could be eligible to receive a tax credit up to 50% of the costs of your employees’ premiums.
The Work Opportunity Tax Credit (WOTC)
Employers who hire employees from specific targeted groups can receive a tax credit, designed to help populations who have historically had the greatest difficulty finding gainful employment, such as individuals who reside in high-poverty areas (Empowerment Zones), convicted felons, certain veterans, and other defined categories. (4) If you are planning to hire staff in the near future, consider whether your business may be able to draw from any of these labor pools.
Small Business Retirement Plans
The Setting Every Community Up for Retirement Enhancement (SECURE) Act created new incentives for employers who offer 401(k) plans to their employees, which went into effect for three years starting January 1, 2020. A small business can claim up to $5,000 in tax credits related to qualified startup costs, plus an additional $500 credit for adding an automatic enrollment feature to its 401(k) plan. The credit is only available to small businesses who paid wages of at least $5,000 to fewer than 100 employees in the prior year, and additional restrictions apply. (5)
Starting in 2020, taxpayers can now claim an “above the line” deduction of $300 for contributions to a tax-exempt organization. This deduction is unique in that filers who do not itemize their returns can still claim this deduction. A proposal is on the table that could increase this special charity tax deduction to $600 for tax year 2021. (6)
If you would like to take a closer look at the programs and incentives that are available to help your small business, or if you have not recently reviewed your retirement plan, let’s talk. You can schedule a free introductory meeting online or reach out to us at firstname.lastname@example.org or 309-214-0152 with any questions.
Scott McCord is founder and Investment Advisor Representative at Anthem Financial, providing values-based financial advice as a fiduciary. With over 20 years of experience in the financial industry, Scott focuses on building long-term relationships with his clients so he can understand their unique values and guide them through the ups and downs of their financial lives, keeping them focused on their short-term and long-term financial goals. Scott has a bachelor’s degree in business management and accounting and holds the Behavioral Financial Advisor™ (BFA™) and Accredited Asset Management Specialist (AAMS®) certifications, the Series 7 and 66 licenses, as well as life, health, and disability income insurance licenses. Scott is married to his intellectual and spiritual ally, Heather, and together they have two beautiful children, their daughter, Meyer, and their son, Grady. When Scott is not focusing on his clients and family, he volunteers his time on the Peoria Public Schools Foundation board, Impact Peoria board, and Rotary of Downtown Peoria board. To learn more about Scott, connect with him on LinkedIn.
Investment Advisor Representative of and advisory services are offered through Independent Wealth Network, Inc. a Registered Investment Advisor. Anthem Financial is not affiliated with Independent Wealth Network, Inc.