Looking for year end tax planning, here are few items to consider:
1. S Corporation Shareholders:
If you're a working shareholder in an S Corporation, be aware of the IRS's "reasonable compensation" requirements. Complying with these rules can impact your Section 199A deduction and payroll taxes, helping you avoid future issues with the IRS.
2. Last-Minute Business Purchases:
Planning to make business purchases soon? Optimize your tax strategy by acquiring office equipment, machinery, and vehicles before the end of 2023. Utilize the 80% bonus depreciation or Sec. 179 expensing. Be mindful of their impact on taxable income and the Sec.199A 20% pass-through deduction.
3. De Minimis Safe Harbor Rule:
Small businesses can benefit from the de minimis safe harbor rule, allowing the expensing (rather than capitalizing) of tangible property purchases up to $2,500.
4. Self-Employed Retirement Planning:
If you're self-employed, consider establishing a SEP (self-employed retirement plan) to contribute 25% of your business net income, with a maximum contribution of $66,000 for 2023.
5. Employee Bonuses:
Planning to pay employee bonuses? Maximize tax deductions by disbursing bonuses before year-end.
Here are a few Business Awareness Issues:
1. 2024 E-File Mandate:
Starting in 2024, organizations filing 10 or more information returns or statements within a calendar year must e-file. This replaces the previous threshold of 250 filings.
2. Corporate Transparency Act:
The Act mandates that corporations and similar entities report certain information about their beneficial owners to FinCEN. This includes full legal names, dates of birth, addresses, and unique identification numbers. Compliance is crucial for avoiding penalties and ensuring transparency (currently penalties are $500/day if filed late).
Reach out to us if you need help with year end tax planning strategies. (859) 305-1099 or info@afirm.llc