With the new proposed tax plan, you may want to keep a mileage log.
SARASOTA, FL, May 04, 2021 /24-7PressRelease/ — Under President Joe Biden’s new proposed tax plan tax rates for individuals whose income is $400,000 and higher would increase while corporations would also be subject to a new minimum tax on book income. The Social Security tax would be extended to higher income levels and the estate tax exemption would be reduced by approximately 50%.
What does this mean for Small Businesses?
For example, a small business’s tax bill with a $1.5M gross revenue that pays out a total of $400,000 in wages to its employees and a net income of $800,000 to the owner would go up by $1112,150 / tax year. The reason behind this is that the business will not receive the Qualified Business Income Deduction otherwise know as the QBID and also that under the new tax plan the tax rates will be higher.
What about the Self-Employed?
As of Apr 12, 2021, the average annual pay for someone who is Self Employed in the United States is $83,792 a year. The Biden plan would raise the top individual rate on ordinary income and net short-term capital gains back to 39.6% from 37%.
Will Companies be the ones losing the most?
Biden proposed to increase the corporate income tax rate from 21% to 28%. The proposal also includes a 15% minimum tax on corporations with a global book income of $100 million or more. Under Biden’s plan, corporations would pay at least $2 trillion more in taxes than they do now.
How to prepare for the changes
401(k): Employees can reallocate money when preparing their taxes. Less taxable income means less tax, and 401(k)s are a popular way to reduce tax bills. A 401(k) plan is an employer-sponsored defined-contribution pension account. Employee funding comes directly off their paycheck and may be matched by the employer.
The IRS will not tax what is diverted directly from a paycheck into a 401(k) Form. For 2020 and 2021, this money can add up to $19,500 per year per account.
Earned Income Tax Credit (EITC): Depending on the amount of an income (i.e. if it is less than $57,000 / year), marital status, and how many children a taxpayer has, they might qualify for a tax credit of up to almost $7,000 in 2020 and 2021.
Tax Deductions: Employees, Employers, and Entrepreneurs alike can benefit from tax deductions. The single biggest return on taxes out of all the Business tax deductions out there is on Business Mileage. Taxpayers can claim an average of $12,000 on Business Mileage, and they can even claim their previous 3 years’ worth of Business Mileage Deductions in case they haven’t done so as of yet.
There are two ways that you can track Business Mileage:
I. Pen and Paper: When reconstructing a mileage log retrospectively, there are numerous fixed details one must pay attention to. This requires a lot of work and energy and it is fairly easy to leave mistakes in the mileage log.
II. Mileage tracker app and Web Dashboard –Mileage trackers with GPS technology can only track real-time driving. You can’t use them for creating or reconstructing mileage logs retrospectively. Even if your driven mileage is based on reality, you just can’t record them that way. But with MileageWise you can make up for forgotten mileage logs, with the AdWise feature and by checking 70 logical conflicts your recommended logs will be good to go and IRS-proof, meeting every expectation. After reconstructing your past mileage logs, you can continue tracking your trips with MileageWise. Just as you would do it with a mileage tracker. MileageWise can detect your trips automatically as well, but without using up your data and battery. When you arrive at a destination the app offers you a partner and the purpose of the trip from an already existing database. You can always add new partners to your list, which then will be available for you automatically in the future.
MileageWise is a Web Dashboard and Mobile App solution for creating IRS-Proof Mileage logs. By entering your trips to the Web Dashboard or automatically logging your miles with the Mobile App you can create IRS-Proof Mileage logs even Retrospectively in just 7 minutes a month. You can also perfect your already existing Mileage logs by importing them into the Web Dashboard, as the software monitors 70 logical conflicts when processing and correcting a Mileage log making sure the result is truly IRS-Proof, meeting Every Expectation. If you forgot to log a trip, the AdWise feature helps you recover your lost mileage based on your past visits and other patterns and parameters you set.
With MileageWise Small Business Owners can get a deduction of $12,000 per tax year on their business mileage, Employers can establish an Accountable Reimbursement plan and Employees can claim more accurate business mileage quicker. Rideshare drivers can clarify and make an integrated mileage log from their fragmented logs. And Tax Professionals can radically reduce the time they spend on administrating their clients’ mileage logs.
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