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Tax Planning Ideas for Your Business

Kaila Cantu

Summer is a great time to start looking at ways to cut your business’s 2023 tax bill. Consider these ideas:

Tips for Saving on Business Taxes

  • Review Employee Benefits: Employee benefit programs can be a significant expense for small businesses. Conduct an annual review of health, dental, vision, and retirement benefits to identify opportunities for cost reduction and potential tax benefits. When it comes to retirement plans, consider various alternatives such as Roth 401(k)s, Traditional 401(k)s, SIMPLE IRAs, SEP IRAs, and defined benefit plans. Pay special attention to any ownership contribution limits to maximize tax advantages.
  • Plan Equipment Purchases: To take advantage of tax savings, plan your business equipment purchases strategically. In 2023, businesses can expense up to $1.16 million worth of qualified equipment purchases. Keep in mind that some equipment may have long lead times, so start planning early to ensure that the equipment is in service before the end of the year.
  • Stay Informed About Changing Tax Legislation: Tax laws and regulations evolve each year. Stay updated on the latest changes and proposals that may impact your business taxes. Here are three significant changes to consider in 2023:
    • New Electric Vehicle Credit: Businesses purchasing qualified commercial clean vehicles could qualify for a clean vehicle tax credit of up to $40,000. The credit is nonrefundable, and there is no limit on the number of credits your business can claim.
    • New Form 1099-K Reporting: Your business will receive a Form 1099-K from credit card companies and third-party payment processors for payments totaling $600 or more in 2023. Be prepared for potential complexities in next year’s tax return due to this reporting requirement.
    • New Retirement Plan Benefit: Setting up a retirement plan for your business is now more affordable with new rules. Qualifying businesses that establish new retirement plans may receive a tax credit covering 100 percent of administrative costs for up to three years. Additionally, there is a credit based on employee matching or profit-sharing contributions.
  • Conduct a Periodic Business Organizational Review: Changes in your business or the tax landscape may necessitate an organizational change. Different tax rules apply to partnerships, sole-proprietors, S corporations, and C corporations. Conduct an annual review to assess whether your current business structure still makes sense and aligns with your tax goals. This review may also involve planning for future ownership changes or adjustments to accounting methods, significantly impacting your long-term tax liability.
  • Understand Interstate Tax Risks: If your business operates in multiple states, it’s crucial to review state tax liability obligations. State tax laws are becoming increasingly complex and creative, affecting businesses with interstate activities. Understanding and planning for potential tax risks in this area can help you avoid unexpected tax liabilities.

For any questions or concerns regarding these tax-saving tips or any other aspects of your business, feel free to contact us for personalized advice and assistance. Proper tax planning can significantly contribute to your business’s financial health and success.

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