What To Know About Year-End Tax Planning For Small Businesses

1. To defer income into 2024, cash-basis businesses can delay billing customers until January, 2024 for 2023 services so that payment is not received until 2024. On the other hand, accelerate business expenses for 2024 by prepaying them in 2023.

2. For 2023, a small business can immediately expense up to $2,500 of the cost of a fixed asset such as equipment, a machine, computer, etc. rather than depreciating the asset cost over 5 or 7 years. Also, bonus depreciation is 80% of the cost of business property acquired and placed in service in 2023.

3. If your company does not have a qualified retirement plan for yourself and your employees, you can set up a SEP-IRA, solo 401(K), or SIMPLE plan before 12/31/2023. You can maximize the 2023 contributions to the plan, since the employer contributions are tax deductible in the year they are made for the plan participants.

4. Pay year-end or productivity bonuses to your employees before year-end. In order for these to be deductible by the company, bonuses must be recorded as paychecks and be included as wages. Also, remember that an S corporation shareholder/employee must be paid a reasonable salary for the year. The IRS will be watching for this.

5. To increase deductible business expenses in 2023, purchase items that your business will require to maximize deductions for this year. For example, buy equipment, stock up on office supplies and prepay bills for advertising, brochures, flyers, subscriptions, rent, insurance, and utilities.

6. Attend a seminar, workshop, or conference that is related to your business. The costs are 100% deductible while the meal costs are 50% deductible. Entertainment costs are no longer deductible.

7. S corporation shareholders who anticipate that the S corporation will pass through a net operating loss to them for the year must have positive basis to deduct the loss. Consider making a loan to the S corporation to increase basis so the loss can be deducted.

8. Buy a company vehicle for business use. For a vehicle weighing under 6,000 lbs., the 2023 expense deduction is $20,200 including bonus depreciation and $12,200 without bonus depreciation.

9. Keep a mileage log and track your business miles. The IRS mileage deduction for business travel in 2023 is $.655 per mile.

10. For 2023, 20% of the net income of a qualified trade or business, including S corporations, partnerships, and sole proprietorships, is a deductible expense on the business owner’s individual Form 1040 tax return.

To learn more about 2023 tax planning ideas for business, call our office today at (727) 391-7373.