Small Business Tax Tips for NEXT Year’s Filing!

SPB Tax Tips

Now that we’re all done with this year’s tax filing season…wait, you mean you filed an extension? So you’re not really done? Welcome to the club! Upwards of 19 million taxpayers did the same!

Getting back to what I was saying…whether you are indeed finished with this year’s tax season or not, you probably have some idea of how much you got refunded…or how much you are going to owe the IRS. Therefore, you have some basis upon which to start planning for next year, especially as it comes to your small business practices. It seemed like a good time to share a few “Pro Tips” to think about as the year goes on so things aren’t quite so “taxing” next April.

Vehicle Expenses

Does your business rely on company vehicles to get work done? You can deduct expenses like purchase and upkeep of those vehicles from your taxes! If you use your personal vehicle for business purposes, you get to take a tax deduction for mileage, but you need to keep a record of each trip (starting place, destination, miles traveled, purpose). There are several ways to do this, including the old-fashioned, hand-written mileage log, but our favorite is the mileage tracker embedded within QuickBooks Online. The app automatically tracks trips start-to-finish…you just have to put in a category. Full disclosure, QBO is one of the services we offer.

Charitable Donations

Do you believe in giving back to your community? You can feel good about it AND get incentivized in the form of write-offs! Monetary gifts given to tax-exempt organizations may be deductible, but what if you give merchandise to a nonprofit for use as a door prize in a fundraising event? You may be able to write off those donations, too! Talk to your tax professionals to make sure your intended donation qualifies.

Retirement Plans for Employees

If your business has up to 50 employees you can now get a tax credit for 100% of the cost of starting a retirement plan for them, up to $5,000, as well as a credit for up to $1,000 in employer contributions to each employee’s plan. Previously the credit covered up to 50% and it does phase out for businesses with 51 to 100 employees. If you have been thinking about starting a 401k or other retirement plan for your employees, this is a tax credit that makes sense to think about.

Energy Efficient Renovations

Last August, the Inflation Reduction Act was signed into law. Among its many provisions were incentives for you to make your business more energy efficient. The Energy-Efficient Commercial Buildings Deduction allows business owners to get a larger deduction per square foot of renovation if the project qualifies. Purchases of electric or fuel-cell vehicles can get your business a large tax credit, as well.

Remote Employees

Remote work can be a way for businesses to attract and retain great employees. The issue can come with the employee living in a different jurisdiction than the employer. Last month we talked about the implications from a standpoint of workplace rules and regulations, but you want to make sure you are also compliant with payroll and state tax filing obligations. Remote workers within another state get complicated…what if one of your key employees decides to move to a different country? If you don’t have a good tax advisor already, it’s time to get one! 

1099-K Rules

We’ve talked about this before in depth…after giving everyone an extra year’s worth of a break, any money paid to your business using a third-party settlement organization (such as Venmo, PayPal, or Cash App), will be reported to the IRS and you will be issued a form 1099-K, IF the total amount for the year is $600 or more. If you get paid using an online payment system like the ones mentioned…it will be much easier for the IRS to track what you’ve been paid from the 2023 tax year going forward.

Pass the SALT

This is another one that isn’t “new” but it does bear repeating if you are—or are thinking of—operating in a high tax state. Federal filing rules starting in 2020 mean you can only deduct up to $10,000 in state and local taxes (SALT)…that includes property and income taxes. This is applicable to personal taxes, but many small businesses operate as pass-through entities with the owners filing through personal tax returns. And that means if you are very successful at what you do—and you can do it from a state with a low tax burden (we’re thinking Tennessee!)—then you should do so.

Home Office Deductions

Do you use part of your home exclusively for business on a regular basis? Then nearly everything from percentage of the interest paid for the property to a percentage of the utilities is a business expense. This is nothing new, but in these days when “work from home” is still on everyone’s mind, you really should be taking advantage of the rules if you can.

Hire the Right Bookkeeper

Yes, we are biased…a large part of our business comes from bookkeeping for small business owners. The truth is that as your business grows, your time is much too valuable to be spent keeping up with all the numbers. You should be doing those things that make your business special and make your business profitable! Hire Southern Payroll & Bookkeeping to take care of the math, compliance, and payroll aspects. Call us at 423-207-2497 today to get started!

Articles referenced:

Motley Fool

Small Business Tax Tips for NEXT Year’s Filing!