Marcum 2021 Year-End Tax Guide

BALANCING OWNER AND ENTITY PAYMENTS

Tax planning is performed to minimize the tax impact to the owners of the company. Utilize opportunities to ensure a suitable balance between entities and owners. If there are interrelated entities or several owners, careful attention should be given to ensure the lowest tax rates available among the contractor, its owner, and any related parties. These tools can include structuring salaries, guaranteed payments, management fees, rental agreements, and owner financing. It is important to factor in the impact of the strategic use of deferrals, deductions, and credits. Once the tax impact is determined, ensure that proper withholdings and estimated payments are made to avoid penalties and interest charges. THINGS TO DO TODAY! Make a detailed list of priorities and goals to achieve before the end of the tax year and the applicable filing deadlines. Review job cost allocation on contracts with higher margins than projected. Review percentage of completion for tax purposes to make sure the recognition of gross profit is correct. Plan accordingly so that all bonuses to the owners, management, and others are made within the proper time frame, with the correct withholdings, to avoid penalties or disallowance of a deduction. Capital equipment should be purchased to maximize depreciation deductions; verify that purchases are executed on time. MARCUM RECOMMENDATION Teamwork is a critical part of the tax planning process. Information and insights can come from both internal and external parties to the business. Contact your Marcum tax advisor for assistance with proper planning.

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