Tax Laws, Regulations And Other Market Changes Coming In 2021
Many economic changes are expected for 2021; it would be smart to make plans for your business according to these changes. Five changes that will likely affect small businesses are listed below.
Tax Laws And Regulations May Change Considerably
Attention to taxes and tax regulations is important for running a successful business. State governments are expected to find creative ways to impose sales tax as budgets were strained as much as they could be during covid pandemic 2020. Digital services will likely be classified differently (to the state’s benefit).
Additionally, tax decisions being made in Washington D.C. during Donald Trump’s first year in office will affect nearly every taxpayer. Trump’s tax plan included reducing seven tax brackets to three, eliminating the head-of-household filing status, and getting rid of personal exemptions. The new US president J. Biden is expected to overhaul tax laws and regulations from massively, as Trump's system was often criticised for favouring rich, giving massive tax cuts and making richer just richer.
Tax laws are always fluctuating and changing, but the presidential shift will surely affect accounting for all the complexities and changes in the tax landscape.
The incoming Biden administration may have a limited ability to pass the tax changes proposed by Biden during his presidential campaign. Much of Biden’s tax plan included tax increases on higher earners and businesses, which are unlikely to be considered by a likely Republican-controlled Senate.
Instead, President-elect Biden may make greater use of regulatory changes to modify how tax law is interpreted and administered.
Rules related to Global Intangible Low Taxed Income (GILTI), may be examined and modified to provide a less generous high-tax exception, which currently allows corporations to opt-out of paying GILTI. Also, there is interest in changing rules related to the tax treatment of carried interest and the estate tax.
To change rules already in place could be the dreadful process for Treasury and for taxpayers, as changes in regulation and guidance can create uncertainty when trying to comply with the tax code.
If Democrats take control of the Senate, they may consider using the Congressional Review Act (CRA), which would allow Congress to review and overturn regulatory actions taken late in the Trump administration. This procedure has been used before, lately by Trump's administration to roll back Obama's administration rules.
The new administration will also struggle with potential economic relief bill early next year, in addition to ensuring that the upcoming tax season is run smoothly.
In the upcoming tax season, taxpayers will be dealing with challenges like the taxation of increased unemployment insurance compensation benefits or receiving remaining direct payments.
Prioritizing taxpayer certainty and simplicity will be important as the economy recovers from the coronavirus pandemic in 2021 to prepare for a smooth transition to the new tax system without hurdles.
Key Changes In The US Tax Code By Biden Administration
- Enact a number of policies that would raise taxes on individuals with income above $400,000, including raising individual income, capital gains, and payroll taxes.
- Raise taxes on corporations by raising the corporate income tax rate and imposing a corporate minimum book tax.
- Raise tax revenue by $3.3 trillion over the next decade on a conventional basis. When accounting for macroeconomic feedback effects, the plan would collect about $2.8 trillion the next decade.
- On a conventional basis, the Biden tax plan by 2030 would lead to about 7.7% less after-tax income for the top 1% of taxpayers and about a 1.9% decline in after-tax income for all taxpayers on average.
Learn more about Biden's tax plan in this resource by Tax Foundation.
The Freelance Industry Will Continue To Grow
There are many freelance opportunities like bookkeeping and accounting, marketing and advertising, programming and coding, and just about anything else to be thought of. A plethora of products is available to help entrepreneurs increase profits and decrease expenses. Platforms like Amazon, eBay, and Etsy provide services like cloud computing; these platforms are a great help to the entrepreneur.
Besides, corporations have been taking more of an interest in freelance talent.
Many Aspects Of Technology Will Change
The changes in technology use are the biggest economic change to expect in 2021 (and perhaps the most obvious). Digital advertising prices are expected to increase, social media will be used more for selling goods and services, and enhancing user experiences will be the focus of successful business owners. The e-commerce market in general will be more competitive. This increase in technology use is beneficial in many ways, but an increase in the number of hackers testing these technologies are expected to follow.
More cloud-based solutions will be popping all around the place as cloud proved to be a successful element in the business environment thanks to its safety, speed, the spread of solid internet connectivity and more interconnected world allowing for your US software to be developed, maintained and accessed from anywhere in the world.
Read more about what is cloud and how does it work in this guide by ZarMoney.
