As businesses strive to adapt and respond to recent economic challenges, it makes sense to take a look at areas where owners could significantly reduce costs, improve cash flow, or accelerate deductions for tax savings.
Business is the heart of America’s economy and MarksNelson has a deep desire to help yours succeed, using proven strategies that may not be widely known outside of accounting circles. We can help you save money with the processes outlined below, or recommend additional alternatives based on your industry.
Amend Previous Year’s Taxes
The Coronavirus Aid, Relief, and Economic Security (CARES) Act makes several income tax changes that affect businesses. You may find it beneficial to amend your previous year’s taxes to take advantage of the most significant features of the bill.
- Depreciation for Qualified Improvement Property– Provides a technical correction to depreciation of qualified improvement property (QIP). Retroactive to January 1, 2018, the depreciable life for QIP is being changed to its intended 15-year life, which for taxpayers is eligible for 100% bonus depreciation.
- Interest Limitations under Section 163(j)– The limit on deductibility of interest expense increased from 30% of adjusted taxable income to 50% for 2019 and 2020. Your business can elect to use 2019 adjusted taxable income in computing its 2020 limitation.
- Net Business Loss Limitation– Net businesses losses that were generated in 2018 or 2019 eligible to offset other sources of income had been limited to $250,000 if single, and $500,000 if married filing jointly. The CARES Act removes this limitation retroactive to January 1, 2018. Therefore, taxpayers who had losses limited by this provision can file amended returns for 2018 and 2019 to claim a refund.
- Net Operating Losses– Net operating losses from 2018, 2019, and 2020 will be permitted to be carried back up to five years. Losses carried to 2019 or 2020 can offset 100% of taxable income.
Amending your returns can make a difference. Consult an experienced tax professional to get the most savings and to ensure that you’re taking full advantage of all the provisions offered by the new tax laws.
Opportunities for commercial real estate property owners
If you own commercial real estate there are a couple of options to accelerate or save taxes, which may support your bottom line.
- Cost Segregation Study
Cost segregation is an engineering-based analysis of assets within a building. It identifies assets that can be reclassified into a shorter depreciation recovery period than the building itself. Applicable to both new construction or existing structures, a cost segregation study can determine proper tax life and depreciation, resulting in increased cash flow. - Commercial Property Tax Appeal
With increased vacancies likely as a result of COVID-19, there has never been a better time to reduce property tax liability. A property tax appeal can result in reduced operating expenses, increased profitability, and diminished renter attrition.
We guide your company to help you maneuver through the regulatory red tape and reduce property tax liability, in some cases up to 50% or more. A tax appeal can make a huge impact on your bottom line and ultimately make the property more appealing to investors.
Outsourcing to Gain Efficiencies
Success often depends on taking a look at “how it’s always been done” and changing your methods to adapt to modern business requirements. Have you ever considered the value of using external vendors instead of dedicated internal staff and resources?
- Technology
Software, data, and other technologies can be valuable assets to the business, if the same purposeful approach that is used for other business planning, is used for the acquisition and operation of them. Like any business asset, they require maintenance, updates, and security needs to be actively managed. Outsourcing allows you to stay on top of the most current technology and security needs by leveraging the right expertise when you need it. Additionally, technology can help with process and work efficiencies. For example, if you have employees routinely performing repetitive tasks that could be completed by computers, it makes financial sense to automate and allow your staff to turn their expertise to more valuable tasks for the business. - Staffing
Most businesses spend up to 70% of their budget on labor costs. When you outsource selected staff, money saved by not having to recruit, hire, train, and pay benefits and taxes can positively impact your bottom line. Outsourcing skilled labor (such as accounting) helps you take advantage of specialized, industry expertise without the investment of additional headcount. Outsourcing allows employees to focus on what they do best—working to their strengths – while also potentially reducing burnout and turnover. - Business Personal Property Taxes
Requirements for business personal property taxes vary widely by state; some are lax, others are rigid. Without professional tax help, every year it gets more and more difficult to make sure you’re managing taxes on equipment, computers, desks, and other assets to your advantage. An outsourced tax professional can help identify areas where you may be over-paying or double-paying, ultimately resulting in a great opportunity to save money.
These are just a few ideas to consider when seeking ways to improve your position. Remember, the right advisors will be able to address your specific business needs, offer advice to improve your workflow, and keep your business running smoothly.
MarksNelson takes pride in getting to know your business or specialty in great detail so that we can tailor a solution to fit your goals. Please contact us to learn what strategies might help your business. Together, we can explore options that can save money and help you move forward.
