Karla Dennis, EA, MST & CEO of The Award Winning Tax Accounting Firm Karla Dennis and Associates Inc. — Specializing In Tax Planning
With the upcoming presidential election, market volatility and a pandemic, it can be challenging to make sense of it all. If you have been wondering how current events might impact your financial life and tax planning, you aren’t the only one.
With that in mind, here are some financial planning considerations for business owners during these uncertain times.
What’s happened so far, and what does that mean for you?
How will your taxes be affected during and after election season? Looking back at history can give you an idea of what you can expect in the near future. Usually you can expect to see the incumbent using executive orders and fiscal policies to cut taxes for individuals. And because of Covid-19 this year, we saw an increase in the public use of government financial aid and business loans through stimulus packages and programs like the Paycheck Protection Program. We also saw payroll taxes cut and business owners’ payroll tax payments pushed back to next year.
Because of the payroll tax cut, credits and loans, you might have increased cash flow, but will that continue? Although right now you may be seeing an artificial inflation of your cash flow, as we enter a new presidential term, cash flow will likely tighten, so it’s time to anchor home plate.
What does it mean to anchor home plate?
It means to establish a budget, keep track of expenses and not make any major purchases. As a business owner, it is important to be forward thinking and come to terms with your financial plan after the election. Track your loans and debts and make sure you have budgeted to pay them off. Establish a limit to your spending each month so you can set aside savings for a rainy day. And keep building your business and financial wealth while consumer spending trends up as many people continue enjoying the benefits of their own artificially inflated budgets.
Consider your taxes.
Taxes will need to increase to pay for the decrease in taxes that business owners like you have been benefiting from this past year. As we turn the corner and enter a new presidential term, you may see your money tighten, less tax benefits become available and taxes increase. Not only that, but tax credits to keep individuals on your payroll could be harder to come by.
If a new president is elected, that president will champion their own policies based on the things they believe in. But regardless of who wins the election, you can expect changes to your financial life, because it’s likely tax laws are going to change during the upcoming term.
If you are proactive in making money, frugal in spending money and mindful of your ability to pay all debts, you will save yourself money, time and headaches. Make sure to meet with your tax adviser or financial consultant to plan ahead and create a strategy that works for you and your business.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Source: Forbes – Money