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Imagine not knowing about tax benefits that could save your business thousands of dollars. Is it money that could be used to buy new equipment, set aside money for difficult times, or reward hard-working employees? Now consider Pat. He nearly missed out on the chance to win a particular award in his 2021. credit Thank you for keeping your company handyman on-site during the pandemic. Fortunately, Pat learned he could access this credit by amending his 2020 and his 2021 IRS returns. (The IRS allows this for three years after filing). If Pat knew about this credit today, he wouldn’t be able to take advantage of it. It was a relatively small thing for Pat, but it was still significant.
This is just one example of the importance of staying on top of changes in tax law. Changes enacted by Congress (or local governments) can save businesses or reduce costs. Most small businesses will be filing their 2023 tax returns over the next few weeks. So now is a good time to look at changes you may have missed when planning for 2023, but could still take advantage of.
Knowing the new tax law doesn’t just affect your annual business taxes.Learn about tax law revisions in advance You can make better financial plans. You can save money to ensure you can pay your bills. If you pay less, you can use that money to implement business strategies that you had to postpone or completely abandon.
With the 2023 tax filing season yet to begin, it’s time to take a look at what changes have occurred that will impact your business. If you need to pause on any of these items, act now to avoid problems as April 15 approaches.
Related: Want to make your taxes easier? Work on it year-round, not last minute.
Top 10 changes to look out for when filing your 2023 taxes
- Depreciation. Companies have traditionally been able to deduct the cost of large assets over their expected useful lives. If the $1,000 computer lasts him 10 years, he can deduct $100 each year until the final year. This may reduce your tax liability. Since mid-2017, companies have Claim 100% bonus depreciation Moreover. (bonus depreciation (This was the government’s way to encourage small business investment and give a jolt to the economy.) But that bonus will go to 80% in 2023 and decrease by another 20% each year until bonus depreciation ends. I will do it.
- Environmental credits. The credits available to business vehicles under the Inflation Control Act of 2022 depend on whether the clean vehicle was operated between January 1 and April 17, 2023, or after April 18, 2023.
- Retirement plan incentives. If you have up to 50 employees and are looking to reward your employees or want to be more competitive with them, Retirement allowance system Currently, you can fully deduct up to $5,000. Businesses with 51 to 100 employees can receive a 50% credit on costs.
- Employer Contribution Tax Credit. If your retirement plan includes the following: employer contributions, you may receive some or all of that cost as a federal tax credit. This credit is available only to participating employees whose income is less than or equal to her $100,000, subject to matching contributions. The maximum amount per employee is $1,000.
- The net operating loss deduction amount will change. Previously, if you had a net operating loss, for example, if you spent $10,000 on inventory but only had $8,000 in sales, you could carry that $2,000 loss over to the next tax year. What you can do from 2023 is: deduct 80% of that loss ($1,600 in this example).
- Mileage will change from tax year 2022. If you use your personal vehicle for business, the per-mile deductible increased from 62.5 cents to 65.5 cents in 2023. This also applies if you reimburse your employees if they drive your car for you.
- Form 1099K. The American Rescue Plan Act of 2021 required third-party payment institutions (such as eBay, Amazon, and PayPal) to: Report the transaction to the IRS If the amount exceeds $600 per year. If your business (or side hustle) sells products through an online retailer, you may have been asked to enter your Social Security number or Employer Identification Number to receive Form 1099K. However, at the end of 2023, the IRS declared that this year would be a new year. “Year of Transition” You may not receive the form. You must report that income and pay taxes on it.
- Interest Expense Limits. From 2017, limit How much interest can you deduct? This he changed in 2022 and further improved in 2023. IRS explains changes here. The bottom line is that if the limit is low and the interest rate is high, you may not be able to deduct the entire amount of interest. If this applies to you, this is a good example to seek the help of a tax professional.
- 401(k) Contribution Deadline. Tax year 2023 is the first year that sole proprietorships and single-member LLCs can make first-year contributions by the April 15 tax filing deadline.
- Food and entertainment. Keep in mind that if you started your business during the pandemic when you could have written off 100% of these costs, you would only have 50% of your costs. Food and entertainment expenses in 2023 Deductible.
Related: Make tax season as painless as possible with these 6 steps
If you focus on the federation, don’t overlook local changes.Iowa and Arkansas lowered the top corporate tax rate In 2023. Did your state and local government do?
Need help? The I.R.S. Hire more customer service representatives —However, recent budget agreements have reduced some of the funding allocated to the Inflation Control Act.
Looking ahead to 2024, where can you learn about these changes? Keep an eye out for coverage in the business press of the business section of trusted news outlets (in print or online; you’re already reading it) entrepreneur.com) or industry-specific publications. The IRS’s website offers a variety of help. That news release will give you early warning of the changes that will occur. Also, look for tax news websites, the blogs of your chamber of commerce, the Small Business Administration, your local small business development center, your trade association, your accounting software provider, or check with your accounting professional.
Remember, corporate tax season is actually 12 months a year. Get organized, plan for the future, and start paying attention to what’s changing in 2024 now. That way, you can adapt and grow.