Online merchants are seeing a rise in sales as consumers have relied on and indulged in ecommerce more than usual in the wake of the coronavirus pandemic. Ecommerce orders continued to rise as of April 27th, with an increase in order volumeIncreased by 50%Comparable to 2019.
My ecommerce accounting firm is witnessing an increase in first-time etailers opening their doors as a way of generating additional income. Current clients are reporting sales figures that match the volume of Q4 sales.
Reduce Your Tax Burden
Taxes are inevitable. Taxes are inevitable. To save money on taxes, plan ahead, make the most of deductions and properly prepare tax returns. It is crucial to remember that tax planning to reduce your tax burden takes place during the tax year, and not after. It is impossible for an accountant to restructure your business in tax season to save taxes. This must be planned and customized well in advance. Your business can save money by taking steps before the end the tax year.
Now is the best time to make sure your sales are increasing due to COVID-19 or other factors. Failure to manage taxes properly could result in your business being charged with IRS interest and penalties, and/or you having to pay hefty taxes. You might be able to keep more of what you earn by learning how to minimize taxes.
How to Save on Taxes
This can be a less daunting task if you work with an expert, such as an ecommerce CPA to help you manage your business taxes and plan ahead to take advantage all deductions. These are some ways you can save taxes that you should start planning now.
- Contribute to a retirement program . Contributions to many retirement plans like traditional IRAs and traditional 401(k) are 100% tax-deductible. Also, you can deduct payments made after the end of the year as long as they are made before April 15. A contribution of March 15, 2020 can be deducted from the 2019 tax return due April 15, 2020.
- Create an “Accountable Plan.” This IRS-approved reimbursement program allows businesses to reimburse employees for business expenses incurred as part of their work. It could also include you, the business owner, if you are an employee of your business. Once an Accountable plan is in place, you can deduct the amount that was reimbursed as though the business had actually incurred it.
- Become a S-Corp.S-Corps could save you up to 15% on your tax bill, if used correctly. This strategy is great because even if your LLC is still legal, you can file an IRS election to be considered an S-Corp for tax purposes.
Stay Current with Legislation
The tax law is always changing. There are major cases, IRS rulings, and court cases that can be found throughout the year. These developments offer businesses tax opportunities that are positive. COVID-19 is a good example.Employee Retention Credit. 50% of the first $10,000 for qualifying companies is tax-deductible, provided you can prove your company was affected by the virus. This credit is available to all employees if your company has less then 100 employees.
Ecommerce sales experience high growth periods. If your company is fortunate enough to have an influx of customers now, that’s fantastic. You don’t want your ecommerce tax obligations or responsibilities to be overlooked by the increase in sales. You should not begin planning for your taxes as soon as the 2021 tax season starts. Effective planning should start right away to get the best results and reduce your tax burden. A professional who specializes in ecommerce tax services, accounting and business structuring will save you a lot of time (and headaches!) In the long-term.
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