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Strategic Year-End Tax Planning: Maximizing Benefits for Businesses in 2022-2023 and Beyond

As the year-end swiftly approaches, along with the festive season, it's prudent to divert your attention momentarily from holiday celebrations and focus on potential year-end tax strategies beneficial for both 2022-2023 and 2023-2024.

Here are some last-minute tax considerations for businesses:

Business Planning Opportunities:

  • S Corporation Shareholders:

Working shareholders in an S Corporation should be aware of the IRS's "reasonable compensation" requirements. Understanding these requirements can impact the Section 199A deduction for qualified business income and payroll taxes. Reviewing your situation now can help prevent issues with the IRS in the future.

  • Upcoming Business Purchases:

If you plan to make business purchases, consider doing so before year-end to reduce taxable income. Utilize 80% bonus depreciation or Section 179 expensing. Be mindful of the impact on taxable income and the Section 199A pass-through deduction.

  • De Minimis Safe Harbor Rule:

Ensure you take advantage of the de minimis safe harbor rule, allowing small businesses to expense tangible property purchases up to $2,500 rather than capitalizing them.

  • Self-Employed Retirement Plan (SEP):

If you're self-employed, establish a SEP and contribute up to 25% of your business net income, with a maximum of $66,000 for 2023.

  • Employee Bonuses:

Consider paying employee bonuses before year-end to accelerate the tax deduction.

Business Awareness Issues:

  • 2024 E-File Mandate:

Starting in 2024, organizations filing 10 or more information returns or statements in a calendar year must file electronically. Some returns not previously required to be e-filed now fall under this mandate.

  • Corporate Transparency Act:

The Act mandates corporations and similar entities to report beneficial owner information to FinCEN. Reporting deadlines vary based on the company's creation or registration date.

Every business situation is unique, and these suggestions may not universally apply. To ensure you're in a tax-advantaged position, seek advice from an experienced tax professional. Don't hesitate to reach out to our office for personalized assistance and alleviate any tax-related stress.

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