Year End and 2023 Tax Planning Considerations for Businesses

With the 2022 tax year ending, making time to consider what last-minute tax moves you can make to reduce your taxable income and tax bill come filing season is important. The Inflation Reduction Act was signed into law in August of 2022 and is a pared-down version of the Build Back Better Act that was proposed last year. Most of the impact of this law was directed toward renewable and clean energy efforts and providing added funding for the IRS. In addition, the inflation rate has caused larger than average increases to several government programs and tax credits that could impact your tax planning for next year.

Keep reading for last-minute tax moves for 2022 and considerations for tax planning in 2023.

• • Employee Retention Tax Credit: Be wary of businesses that approach you, claiming you’re eligible for the Employee Retention Tax Credit. Many of these companies assist your business with the forms for a large upfront fee that may or may not be based on the total credit you’re eligible for. These tend to be scams where the business is then on the hook for repaying the credit to the IRS.
  • Work Opportunity Tax Credit: Hiring workers who face barriers to employment, like qualified veterans, can provide your business with a tax credit of up to 40% of the initial wages (maximum $6,000). Use Form 8850 and prescreen new hires within 28 days of their start date to find out if their wages are eligible for the tax credit.
  • Bonus depreciation changes: The 100% bonus depreciation will decrease to 80% beginning in 2023 unless congress extends this tax benefit. Make sure to purchase and put into service any new equipment your business has been considering before this tax deduction decreases on January 1, 2023.
  • Business expensing: Up to $1.08 million of new or used business assets can be expensed if they were put into service during the 2022 tax year. Phase outs begin at $2.7 million in assets put into service in 2022, and the amount of expenses cannot exceed the business’s taxable income.
  • Research and development tax credit: The grace period for incomplete reporting provided with research and development tax credit refund claims has been extended until January 10, 2024. During this time, claims missing support information will be notified, and businesses given 45 days to provide the missing information.
  • Pass-through Entity Tax Election: S-Corporations and partnerships have the option to make an annual election to pay an entity level state tax for years beginning on or after January 2022. This enables the individual to deduct state income tax above and beyond the $10,000 Schedule A limitation.
  • Commercial clean vehicles – The IRA provides new tax credit opportunities for businesses looking to reduce their carbon footprint by replacing eligible medium- and heavy-duty vehicles with zero-emissions options, as well as reducing emissions from diesel engines.
  • Corporate stock buybacks: Beginning January 1, 2023, a new 1% excise tax will need to be taken into consideration for corporate stock buybacks. Completing any buybacks before the end of the year can help avoid this new tax liability.
  • Business meals: The 100% deduction for expenses paid for food and beverages provided by a restaurant expires December 31, 2022. Consider moving up any business-related meetings into December to take full advantage of this tax deduction.
  • More considerations to keep in mind for your business:
    • Sales and use tax policies continue to change on a state-by-state basis. Make sure you know the policies where you are doing business.
    • Retirement plans may offer additional tax breaks and incentives for business owners to establish plans for themselves and their employees. Review these and your benefits offerings regularly.

Additional Considerations for Taxpayers

• • Remote work arrangements: Businesses with remote work arrangements may find changes to their tax liabilities. Businesses may see themselves owing taxes in states where their remote worker resides.
  • Virtual and cryptocurrency reporting: Buying, selling or using virtual currencies and non-fungible tokens (NFTs) can have tax implications for taxpayers. Keep this in mind as the tax filing season approaches.
  • Phishing and fraudulent schemes: The IRS has issued several notices reminding taxpayers that first contact is always made by regular mail. Any emails, phone calls, or texts from someone claiming to be with the IRS is most likely an attempt at fraud.
  • IRS automated collection notices: The IRS temporarily paused sending out overdue notices. The agency halted more than a dozen automated notifications for back taxes, levies, and unfiled returns while they work through their backlog of items. Once fully caught up, it will continue to issue notices.

While these are great places to start your year-end tax planning and 2023 tax strategy, every situation is unique. Working with a knowledgeable tax professional can set you up for success. Give our team a call to discuss what last-minute moves you or your company should be making and to create a plan for next year.

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Amber Goering, Partner

Amber, our founding partner, is a Certified Public Accountant with more than 20 years of diverse experience. She specializes in working with individuals as well as growing and mature businesses, assisting with full range services, including tax planning, accounting, compliance and consulting.
 
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