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Utah Business

If you're a business owner, tax planning should be top of mind this year. Use these tips and tricks to help you with planning.

Everyone’s favorite time of the year: DON’T be late to tax planning

Against all odds, Utah’s economy continues to grow thanks to the hard work and diligence of this State’s workforce and so many of its great companies. Not without the obvious challenges facing Utah businesses today, agility and innovation continue to be hallmarks of the Beehive State. 

No matter where your company falls on the spectrum—large or small, startup or established, thriving or still in pivot-mode—end-of-year tax planning is essential. 

While you’ve likely been focused on adapting to a new business landscape, the tax landscape has also been in flux. Beyond PPP loans and loan forgiveness, the CARES Act unleashed a confetti of tax provisions that may provide additional relief, both in future years and on past returns.  

Here are five of the most critical and beneficial 2021 and 2022 tax planning considerations for Utah businesses. 

  1. Strategize for potential tax law changes. While no tax professional has a crystal ball, we can confidently expect upcoming changes to the tax law following the inauguration of President Biden. That said, we continue to gain more insight every day into what those potential changes to tax legislation might be. As such, proper planning now will help you better strategize for what the future holds – while  failing to do so could prove costly and set you back compared to your peers. 
  1. Not all research and development include white coats. Are you developing a new product, software, formula, process, technique, or anything of the sort? If so, then you could be missing out on substantial tax benefits related to the money that you’ve been pouring into these projects. I’m not just talking about your white coat scientist working with test tubes and beakers in a lab, either. The R&D tax credit is afforded to so many more companies than even realize it. There aren’t too many home runs in the tax world, but when it comes to the R&D tax credit, Babe Ruth would be pointing over that centerfield fence. Ask your tax provider today about the R&D tax credit to ensure that you are maximizing your company’s tax benefits and aren’t leaving money on the table.
  1. Choose the right entity type for your business. Are you looking to create a legacy business? Sell your company? Raise capital? Distribute profits? Expand internationally? These are some of the questions that you need to ask to determine which entity type would be most beneficial for your business. Even if you find your business in a less than optimal tax structure, it is likely not too late. As your business continues to adapt and evolve, so can the entity type for which your business operates. 
  1. Update depreciation on Qualified Improvement Property (QIP). An inadvertent oversight of the Tax Cuts & Jobs Act made QIP depreciable over 27.5 or 39 years and ineligible for BONUS depreciation. The CARES Act remedied this oversight, restoring the 15-year life of QIP and making it eligible for 100% BONUS depreciation in the year of acquisition. The result? The ability to deduct more depreciation expenses in 2020 and beyond, or prior years back to 2018.
  1. Don’t forget to bring your whole business to the table. You may not be the first in your industry, but no one else is quite like you. Help your CPA understand the history of your business. Share what options you’re considering for the future. Like many companies in today’s environment, will a large part of your workforce continue to work remotely? Are you contemplating spinning off a division, acquiring another company, terminating a lease, raising capital, or selling property? Your income and expenses may be vastly different than they were before the pandemic, and that may mean a very different tax outlook than you’ve had in the past. Some decisions can have unforeseen tax consequences. Being candid with your tax professional will enable them to provide the most value by helping you avoid pitfalls and capitalize on opportunities for tax savings.

Schedule a meeting with your trusted financial advisor or CPA today, so that you will be able to take necessary action before year end.

Joe Spilner is a tax partner at Squire and Company, PC.