There are quite a few business tax changes that will affect your taxes for 2021. Some of them you will have heard about, while others may have slipped under your radar. Don’t worry if you haven’t kept up to date with all of the most recent tax changes, because we have you covered! We spend part of each week diving into all of the business tax changes, so we can assist you whenever you have questions about how those changes will affect your business. While we can’t write about every single tax change we have encountered this year, we can share the ones that will affect you the most.
Business Tax Changes You Should Know for Filing Your 2021 Taxes
Business Interest Expense Deduction
The Business Interest Expense Deduction was much higher in 2020. However, for the 2021 tax year, the limit for this business deduction will return to 30% of the Adjusted Taxable Income.
Employee Retention Credits
Employee Retention Credits were recently eliminated by the Infrastructure Investment and Jobs Act for any wages paid after September 30, 2021. This elimination will reduce the maximum available payroll credit per employee. The loss per employee could be as much as $6,000.
Paycheck Protection Program Loans
A second round of the Paycheck Protection Program was launched in the beginning of 2021. There are strict guidelines your business must adhere to if you want to qualify for the forgiveness program. It is best to work with an accountant to ensure you can qualify to have this loan forgiven.
It is also important to note that certain states will require you to include this loan as part of your income for your 2021 taxes. Therefore, it is even more important to work with a qualified accountant to ensure you are following all of the PPP guidelines for both your federal and state business taxes.
Standard Mileage Rates
The Standard Mileage Rates continue to change. The 2021 tax year brings a standard mileage rate of 56 cents per mile.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit, or WOTC, is part of the Consolidated Appropriations Act of 2021. This tax credit is available to any business who hires an employee who was currently unemployed for at least 27 weeks. This tax credit is normally equal to 40% of the first $6,000 of wages paid to that employee.
Section 179 Expensing
The deduction for Section 179 Expensing has been increased to $1,050,000. This is the maximum deduction of qualifying equipment totaling $2,620,000 that was placed in service throughout the year. These expenses now include roofs, alarm systems, fire protection, heating, ventilation, and air conditioning units.
Employee Health Insurance Expenses
Small businesses are eligible for a credit on Employee Health Insurance Expenses. To determine which small businesses are eligible, an average wage of $27,800 was set for 2021. This threshold was raised from 2020’s average wage of $27,600.
Entertainment Expenses and Business Meals
All Entertainment Expenses and Business Meals can be deducted at 100% for the 2021 tax year. The meals must be provided by a restaurant in order to be included in this deduction.
Transportation Fringe Benefits
As an employer, you may offer transportation fringe benefits to your employees. The limit for 2021 is $270 for either a transit pass or qualified parking.
Important Tax Deadline Dates You Must Keep in Mind for This Tax Season and 2022
- January 18, 2022 – Q4 2021 Deadline for Estimated Tax Payments – Hopefully you didn’t miss this one!
- January 31, 2022 – Deadline to Send Out W-2s or 1099-NEC/1099-MISC Forms to All Employees and Independent Contractors
- March 15, 2022 – Deadline for Partnership Tax Returns (This Includes LLCs That are Taxed as a Partnership) and S-Corp Tax Returns
- April 15, 2022 – Deadline for Q1 2022 Estimated Tax Payments and Deadline for Both C-Corp and Sole Proprietor Tax Returns
- June 15, 2022 – Deadline for Q2 2022 Estimated Tax Payments
- September 15, 2022 – Deadline for Q3 2022 Estimated Tax Payments
These are the most important tax changes you will see when filing your business taxes for 2021. Make note of all of the important dates I shared above too, because you won’t want to miss a deadline and incur extra fees. If you have any questions about these changes or need to work with an accountant to solve all of your tax year drama, contact me today to set up a meeting.