Begin application for PPP forgiveness – Most banks are now accepting applications for PPP forgiveness, and although the IRS has now made it clear that the timing of the forgiveness will not affect the timing of the taxation, we see no reason to wait on the application. Contact your bank and ask how they would like you to send them your forgiveness application. If you have already received forgiveness, make sure to retain your SBA release letter and let your planner and CPA know that forgiveness has occurred.

Families First Coronavirus Related Leave Credits – Early on in the pandemic, Congress passed a law allowing for government reimbursement of wages paid for employees who are sick with COVID, caring for someone with COVID, under mandatory quarantine, or whose childcare/school is not available. Some healthcare providers have decided to opt-out of this act, but if you intended to benefit from this act but did not receive the credits at the time of processing payroll, you can apply for the credits at your quarterly payroll filings. However, this needs to be done within the 2020 tax year, or you face fees for amending past quarterly filings to get the credits. If you intended to apply for the credits but did not, contact your payroll provider or CPA to help you do so before year-end.

401(k) deferrals – Closures and layoffs this year mean that many people are behind on their 401k deferrals. Make sure to max out employee deferrals to your 401(k) to $19,500 or $26,000 if you are over 50.

Defined Benefit or Cash Balance Plan – If 2020 turned out to be an excellent financial year for you, you might want to consider adding a Cash Balance Plan this year, and it is not too late to do so for 2020. This will allow you to defer a great deal of money to retirement accounts this year and will significantly cut your tax bill; however, this decision is not one to be made lightly. You should visit with your CPA and planner before taking on this complex plan.

Charitable contributions – The CARES Act allowed all taxpayers, not just those that itemize, to deduct charitable contributions up to $300 this year. If you are charitably inclined but hesitant to make contributions if you do not get a tax incentive to do so, now would be the year to consider some small gifts.

QBI deduction – The Qualified Business Income deduction is a home run for business owners. However, there are income limitations on personal service businesses (the majority of our clients fall into this category). If you are a personal service business and your joint taxable income is near the phase-out limitation of $426,600 ($213,300 for single filers), a year-end purchase or expense may pay off greatly to get you below the phase-out threshold.

Taxes Paid? – Many clients may have thought at one point early this year that the income would be down. This may have led you to reduce withholding through payroll or skipping estimated tax payments. The year ended up quite well for most of our clients. To avoid tax penalties, you need to have paid in 110% of your last year’s tax or 90% of this year’s tax. Work with your CPA to make sure this is the case.

Reimbursements – Reimburse yourself for business expenses paid personally prior to year-end if this has occurred.

Health Insurance – If you are an S-corporation, health insurance premiums must be reported on your Form W2 before year-end to be deductible. Work with your payroll provider to make sure this is done with your year-end reporting.

Max out HSAs – 2020 HSA contributions can be made through April 15th, 2021, but making them before year-end tends to make reporting easier. Maximum contributions for 2020 are $7,100 for a family or $3,550 for single taxpayers. You can contribute an additional $1,000 if you are age 55 or older.