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Maximizing Your Small Business Tax Benefits: 2023 Tax Year Strategies & New Reporting Changes

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Helpful Tips You Need to Keep in Mind When Filing Business Taxes for the 2023 Tax Year

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Think of your 2023 taxes as a gourmet five-course meal. You have some sweet appetizers, such as an increased standard deduction, and main courses as updated credits. There may even be room for a desert with other savings options. 

However, navigating the menu can be tricky. This article can help you understand what changed in 2023 and how that can affect filing your taxes. It’ll help you pair the right deductions and forms, ensuring you savor every tax advantage possible.

5 Business Tax Updates for 2023

  1. IRS Online Account Enhancements: Business filers, including those holding Individual Taxpayer Identification Numbers (ITINs), can now access enhanced features in their IRS Online Account. This includes viewing, approving, and electronically signing a power of attorney and tax information authorizations. Additional features like viewing tax owed, payment history, scheduling payments, requesting tax transcripts, viewing IRS notices, and validating bank accounts are also available.
  2. 1099-K Reporting Threshold Delay: The IRS has delayed the implementation of the new $600 reporting threshold for Form 1099-K issued by third-party settlement organizations (TPSOs) for the 2023 tax year. For 2023, the reporting threshold remains over $20,000, with more than 200 transactions. This delay is significant for businesses that process payments through third-party networks, as it affects the reporting and potentially the tax liability.
  3. Inflation Reduction Act: The Inflation Reduction Act, effective from the 2023 tax year, introduces new tax provisions and expands existing ones related to energy efficiency. This includes increased credits for solar energy investments and energy-efficient home improvements. For businesses investing in these areas, the act provides an opportunity for tax credits, which can substantially reduce tax liability.
  4. Deductible Mileage Rates: For the 2023 tax year, business mileage is deductible at 65.5 cents per mile. This is an essential consideration for businesses that require significant travel, as it offers a deduction opportunity for operational expenses.

  5. Business and At-Home Deductions: Self-employed individuals and business owners have various deductions, such as business travel mileage and home office expenses. However, it's important to note that the home office deduction is only available to self-employed individuals, not employees working from home.

Save Room for Desert? Keep These Year-End Tax Planning Strategies In Mind During 2024

Effective Year-End Tax Planning Approaches for Small Businesses

Year-end tax planning is crucial for small businesses to optimize their tax liabilities and maximize their potential tax savings. One approach is to defer income by delaying invoices or accelerating expenses to reduce the current year's taxable income. Another method is to take advantage of tax deductions and credits available for small businesses, such as the Section 179 deduction for equipment purchases or the Research and Development Tax Credit. Additionally, small businesses should review their investment and capital expenditure plans to take full advantage of tax incentives and depreciation deductions. It's also important for businesses to ensure they comply with all tax regulations and deadlines to avoid penalties. By implementing these strategies, small businesses can effectively manage their year-end tax planning and reduce their overall tax burden.

Capitalizing on Inflation Reduction Act in Year-End Tax Planning

As the end of the year approaches, taxpayers must consider the potential impact of the Inflation Reduction Act on their year-end tax planning. The Act allows certain tax deductions and credits to be indexed to inflation, which can result in significant tax savings for individuals and businesses. By taking advantage of these adjustments, taxpayers can minimize their tax liability and maximize their potential refunds. It is important for taxpayers to carefully review their financial situation and consider how the Act may benefit them in their year-end tax planning. Consulting with a tax professional can help individuals and businesses identify opportunities to capitalize on the Inflation Reduction Act and make the most of their tax situation before the end of the year.

Maximizing Retirement Plans for Tax Benefits

Maximizing retirement plans can provide long-term financial security and substantial tax benefits. Contributing the maximum amount allowed to retirement accounts, such as 401(k)s or IRAs, can reduce taxable income and potentially lower tax liability. Additionally, employer-sponsored plans often include matching contributions, doubling savings and tax advantages. For those age 50 and older, catch-up contributions can further enhance tax benefits by allowing larger contributions to retirement accounts. Furthermore, certain retirement plans, such as Roth IRAs, offer tax-free withdrawals in retirement, providing additional tax benefits. By taking advantage of these options and maximizing contributions to retirement plans, individuals can optimize their tax savings and build a solid foundation for a comfortable retirement. Consulting with a financial advisor can help individuals navigate the options and regulations to maximize their retirement savings and tax benefits.

Strategic Use of Pass-Through Deductions for Small Business Owners

Small business owners can strategically use pass-through deductions to lower their taxable income and save on taxes. By taking advantage of the qualified business income deduction, small business owners can deduct up to 20% of their business income from their taxable income. This can result in significant tax savings for business owners. To maximize the benefits of pass-through deductions, small business owners should consider consulting with a tax professional to ensure they are taking full advantage of all available deductions and staying in compliance with tax laws. Additionally, structuring their business to allow maximum flexibility with pass-through deductions can be beneficial. By strategically utilizing pass-through deductions, small business owners can reduce their tax burden and keep more of their hard-earned profits in their pockets.

How can Taxfyle help?

Finding an accountant to file your taxes is a big decision. Luckily, you don't have to handle the search on your own. 

At Taxfyle, we connect individuals and small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will handle filing taxes for you.

Get started with Taxfyle today, and see how filing taxes can be simplified.

Legal Disclaimer

Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

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published

December 19, 2023

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Ralph Carnicer, CPA

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