2021 will be an important year for small businesses to file
their taxes, as many are still reeling from financial losses during the
pandemic. But tax credits and deductions can be used to offset some of your
costs.
Getting tax credits and incentives
Business tax credits and incentives can be an effective way
to save money or offset losses from a difficult year, but many small businesses
don't take advantage of them because they're unaware of what's available to
them. The first step to getting them will be finding what your company
qualifies for. Then, you'll need to regularly monitor compliance.
Some examples of tax credits would be if you provide
childcare services for your employees or employ disadvantaged groups, such as
the formerly incarcerated, long-term unemployment recipients, veterans, and
summer youth.
6 important tax credits for PPP borrowers
Small businesses can take advantage of both federal aid
under the CARES Act and certain tax deductions, including the employee
retention tax credit and research and development credits. In addition, the
energy-efficient building tax deduction and excise alcohol tax break were made
permanent.
The business meals tax credit, commonly known as the
"three-martini lunch," has been temporarily increased from 50% to a
full 100% deduction.
More about the employee retention credit
The Employee Retention Credit provides up to $14,000 per
employee for eligible businesses in 2021. Businesses are eligible to claim this
tax credit if they experienced full or partial shutdowns due to government
orders during the pandemic or can show a 20% drop in quarterly revenue compared
with the same quarter in 2019.
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