As businesses prepare for the 2023 tax season, they must educate themselves on the new tax rules that may potentially impact the amount they owe to the IRS. Business owners can set themselves up for the best tax outcome at the beginning of each tax season by conducting research regarding any updates to existing or new tax laws that are applicable to their financial situation. Often viewed as a mundane task by business owners, taking the time to conduct research and being armed with critical tax knowledge can make a world of difference in terms of breaking even or owing a substantial amount of tax debt to the IRS.
Implement a Filing System
Businesses need to be aware that the key to tax preparation is possessing great organizational skills. Business owners need to implement an electronic or traditional filing system, perhaps even both, for the purpose of storage and organization of all the business’s operational and financial documents; in addition to their employees’ records. Keeping accurate and pristine records is perhaps the most critical step necessary when filling your 2023 business tax returns. Without the required documentation, businesses will not be able to submit their returns thereby causing their business taxes to be late and accruing a tax penalty as a result.
Hire a Tax Professional
Although business owners may feel competent handling the filing of their own business returns, it is highly recommended to hire an experienced tax professional to complete their business taxes. Just as business owners have the qualifications and experience to operate a successful business, so does a certified tax expert who’s professionally trained and equipped with the background knowledge to work on your tax returns to provide you with the best tax solution. Hiring a tax professional should not be underestimated.
Most businesses do not realize the value they bring to their overall tax preparation and outcome. Besides the task of preparing and submitting business tax returns for their clients, one overlooked responsibility that most business owners lack is the ability to meticulously audit all tax forms for integrality and accuracy. Furthermore, tax specialists can represent the business owner during IRS audits. Above everything, all business owners can agree that working with a tax expert will save them valuable time, therefore allowing them to focus on running their operations.
Optimize Business Tax Return
Throughout the year, businesses should be considering strategies to optimize their business tax return in preparation for the 2023 tax season.
Maximize every deduction and tax credit applicable
Although you can’t claim the Employee Retention Tax Credit on your 2022 tax return, there is still time to amend your 2020 and 2021 returns to claim the ERTC. This credit was worth up to $7,000 per quarter per employee and applies only to wages prior to October 1, 2021. The ERTC credit was developed to encourage business owners to retain their employees on staff during the COVID pandemic. There are very specific requirements that you must meet in order to qualify for the ERTC credit. It’s definitely worthwhile to consult a tax professional to determine if you qualify and have them initiate and submit an application on your behalf.
Retirement plans are still a safe bet
If your business is generating revenue, consider transferring your money to a qualified retirement plan that provides a tax deduction for your contributions while postponing taxes accrued on your earnings until you make a withdrawal.
An accountable plan is a great solution to help businesses save money on taxes
By following IRS regulations, reimbursement of business expenses to employees is not considered as income. Therefore, reimbursements are not required to have taxes withheld or W-2 reporting.
Business structure is more important than you think
Remember, the business structure you choose will ultimately determine the tax rates assessed on the profits that you generate.
Match a percentage of employee contributions to the company 401k plan
This strategy creates a win-win situation for both you and your employees. Besides the contribution being deductible, businesses will be saving money in taxes. The greatest benefit is providing greater financial security to your employees.
Review tax elections to minimize taxes
Again, knowledge is power, and staying abreast of tax laws and any revisions can be used to your advantage. Being a savvy business owner and applying tax laws to business and operation expenses will help reduce the cost of your tax obligation in the long run. When purchasing equipment for your business, there are a variety of options for writing off the cost on your business tax return. However, businesses need to be aware that the decision must be made when the tax return is filed. In addition, business-driving expenses can be calculated by simply using the actual costs involved or using the IRS-set rate.
For guidance and professional advice this 2023 tax season, Start Fresh Tax Relief is available to assist businesses. Our goals are to provide business owners assistance with maximizing their deductions and credits, accurately auditing their tax forms, and optimizing the best possible tax outcome for their business.