Important End-of-Year Tax Updates and Opportunities for 2023-24: Key Advice from Barbara Weltman

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Big Ideas for Small Business®, Inc. Founder/President, Author, Small Business Advocate

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Rieva and Brian explore vital tax-related changes and strategic opportunities for small businesses with top tax expert, Barbara Weltman. They discuss maximizing tax credits, adapting to evolving labor laws, and making smart financial choices for the coming year.

Barbara’s Moves to Make in 2023: 

  • Stay Updated on Tax Changes: Tax rules for small businesses are constantly evolving, with changes in legislation, IRS guidance, and court decisions. It’s crucial for business owners to stay informed about these changes to avoid costly mistakes and to take advantage of potential benefits.
  • Beneficial Ownership Information Reporting: The Corporate Transparency Act requires small businesses (excluding sole proprietorships, independent contractors, and general partnerships) to report their beneficial owners to the Treasury. Non-compliance can lead to severe penalties, including fines and imprisonment.
  • Leverage New Tax Credits for Retirement Plans: The SECURE Act 2.0 introduces new retirement rules offering up to five tax credits for small businesses. These include credits for startup costs, auto-enrollment, contributions on behalf of certain employees, and enrolling and contributing on behalf of military spouses. These credits can significantly reduce tax liabilities for small businesses.
  • Navigate Employee Retention Credit Carefully: The Employee Retention Credit (ERC) has been identified by the IRS as an area prone to scams. Businesses must be cautious and consult with their accountants to ensure legitimate claims and to avoid audits and penalties.
  • Health Coverage Options for Small Businesses: Small businesses have various options for offering health benefits, like high deductible health plans with Health Savings Accounts (HSAs) or Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). These plans offer tax-efficient ways to provide health benefits to employees but require careful consideration and often the assistance of a CPA to determine the best fit for the business’s budget and needs.
  • Electric Vehicle (EV) Tax Credits and Considerations: For businesses considering purchasing electric vehicles, there are various tax credits available. However, several factors need to be considered, such as insurance costs, vehicle eligibility, and whether the credit is more beneficial this year or the next. The process also involves ensuring the vehicle is placed in service before the year-end to qualify for the credit.
  • Potential Changes in Tax Laws and Credits: Tax laws and credits, such as bonus depreciation rates, can change frequently, often with retroactive effects. Business owners need to stay informed about these changes, as they can significantly impact tax liabilities and strategic planning.
  • Tax Credits for Hiring from Targeted Groups: Small businesses can benefit from tax credits when hiring from certain targeted groups, such as veterans or long-term unemployed individuals. To ensure eligibility for these credits, it’s important to complete the necessary forms, like IRS Form 8850, during the hiring process.
  • Paid Family and Medical Leave Program: Small businesses in states without mandatory coverage can voluntarily provide paid family and medical leave, qualifying them for income tax credits. However, these credits are not applicable for executives or owners beyond a certain income limit. The program requires non-discriminatory application across all eligible employees.
  • Cost of Living Adjustments for Businesses: The IRS has made cost of living adjustments to various thresholds and limits for deductions and credits, reflecting high inflation rates. This includes increased limits for the qualified business income deduction, net operating loss deductions, and first-year expensing for equipment and machinery.
  • Significance of the First Quarter for Businesses: The first quarter of the next year is crucial for tax and non-tax reasons. Inflation trends may influence compensation decisions, and new regulations from the Department of Labor may affect minimum wage and overtime rules, impacting the status of exempt employees.
  • Monitoring Proposed Labor Regulations: Businesses should be aware of proposed changes in labor regulations, such as those affecting exempt employee status and minimum wage increases in many states. These changes can significantly impact business operations and employee compensation structures.
  • Importance of Estimated Tax Payments: With increased interest rates, it is more crucial than ever for business owners, especially those with pass-through entities, to accurately estimate and pay their taxes to avoid penalties. The final installment of the estimated tax for the current year is a key deadline to meet.

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Episode 32