The end of the year is quickly approaching, but before we ring in the New Year, it’s important to reexamine our tax strategies. It’s an understatement to say that 2020 has been challenging and the economic and fiscal assumptions we relied upon this time last year have likely changed due to the COVID-19 crisis.

The COVID-19 pandemic has created challenging circumstances for many Princeton, Trenton, and New Jersey businesses. The combination of government orders, fear of virus transmission, and reopening guidelines have businesses looking for new paths to profitability under unexpected conditions. According to the New Jersey Economic Forecast, published by Rutgers Economic Advisory Service, 16.7% of the state’s total jobs were lost between February and May 2020.

2020 has been a humbling year. More than any other year in recent history, we’ve learned that expectations can change on a dime. At the beginning of the year, the assumptions we held are likely far different from those we hold now, making year-end tax planning for businesses – regardless of size – more crucial than ever. As we head into 2021, ask yourself some of the following questions and see if you took full advantage of the available tax breaks or if your tax strategy needs adjusting.

The COVID-19 pandemic has created several new challenges for Trenton and Princeton-area business and individual taxpayers. Over the past seven months, various state and local government orders have impacted how and when businesses can operate, including wearing facemasks and various other requirements for customers and employees.

On October 26, 2020, the IRS announced changes coming to various retirement plans for the tax year 2021. The cost-of-living adjustments will affect income limits for pension plans and other retirement accounts.

The COVID-19 pandemic has had numerous impacts on businesses, including decreased revenue, interruptions in supply chains, and having employees work from home. The pandemic has led business owners to pivot and change how they are operating. One item that may be of concern to some business owners, and often overlooked, is whether or not employees that live in a different state from where the business is located and working from home during the pandemic will cause nexus in different states.

The 2020 presidential election is mere weeks away, and the country is still grappling with the fallout from COVID-19. While the U.S. continues to find its way out of the pandemic through extended unemployment payments, low-interest loan programs, and new incentives for businesses, the upcoming election has taken on new importance.

The number of returns examined in the last ten years has declined due to budget and workforce cuts at the Internal Revenue Service (IRS). For the fiscal year 2019, an individual tax return had a 1 in 220 chance of being selected for audit. Ten years ago, it was a 1 in 90 event. The likelihood of being chosen drops to 1 in 466 if individual returns do not include a business or the earned income tax credit.

In early August, the news reported attempts between Congress and the White House to deal with additional Coronavirus relief legislation. After several meetings between the two sides, it was clear no agreement would be reached, leaving many without critical unemployment and other financial benefits.

* Update – August 25, 2020: The IRS has temporarily suspended the mailing of three notices to taxpayers who have a balance due on their taxes.  Learn more here. * The effects of the COVID-19 pandemic on individuals and businesses have been difficult to overlook. It started with the implementation of forced business closures and […]