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By Mae Anderson <\/div><\/div>\n

One tax professional recommends filing for an extension due to pending tax legislation in Congress. Most experts recommend small business owners work with a professional tax advisor.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/div>\n

NEW YORK \u2013 As Tax Day approaches, there are plenty of things small business owners should keep in mind when filing taxes this year. <\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

April 15 is still the annual tax deadline for many small businesses although, unlike individuals, small businesses can have varying deadlines depending on the type of company, the state the taxes are filed in and other factors. Quarterly estimated tax payments are generally required throughout the year. And certain types of small businesses had to file by March 15.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Since business tax filing is complex, most experts recommend small business owners work with a professional tax adviser rather than trying to file on their own or even with tax-filing software.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

\u201cTaxes should not be scary, especially when you have a certified tax professional or someone who is your trusted adviser,\u201d said Amber Kellogg, vice president of affiliate origination and management at business consultancy Occams Advisory. \u201cI always say you don\u2019t go to the dentist to get your oil changed, and you certainly shouldn\u2019t do (taxes) yourself unless you\u2019re an expert.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

But even if small business owners aren\u2019t filing taxes themselves, it\u2019s still important to stay informed about any tax changes during the year. Here are things small business owners should consider as the April 15 deadline looms.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

Consider an extension<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/h3>\n
Because of some pending tax legislation in Congress this year, Mitch Gerstein, senior tax adviser at accounting firm Isdaner & Co., said it might be a good idea to file for an extension. When you file an extension, you still pay estimated taxes, but final paperwork isn\u2019t due until September.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
This gives your tax provider adequate time to file a return. And it\u2019s cheaper to file an extension than an amended return, which costs more in administrative fees.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
One reason Gerstein recommends an extension this year: a bonus depreciation write-off used by many small businesses is set to decrease for 2023. The bonus depreciation allowance was designed to spur capital purchases and it let businesses write off 100% of certain new and used assets in 2022. But beginning in 2023, that will decrease to 80% for used assets, dropping another 20% each year thereafter. However, a tax bill pending in Congress could restore the write-off to 100%. It\u2019s rare that there is such a significant tax bill pending in Congress when taxes are due, Gerstein said.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
Optimize your retirement plan<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/h3>\n
The Secure Act 2.0 passed by Congress in late 2022 gives small businesses some tax advantages if they offer a retirement plan. There\u2019s a tax credit for small businesses starting new employee plans. The credit is up to 100% of the startup costs for adopting and maintaining a new 401(k) plan, capped at $5,000. There\u2019s also a tax credit based on employer contribution, up to $1,000 annually per employee, over the plan\u2019s first five years.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
Changes in research and development write-offs<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/h3>\n
Scott Orn, chief operating officer of Kruze Consulting, works with startups backed by venture capital. Orn said the number one concern his clients are calling about is \u201cSection 174,\u201d a part of the tax code that involves writing off research and development costs.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
In the past, companies were able to deduct 100% of research and development expenses from their taxable income. That was helpful because often that deduction meant the company was operating at a loss and wouldn\u2019t have to pay taxes.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
But starting in 2022 due to new legislation, companies have had to \u201ccapitalize\u201d the expense \u2013 or spread it out over several years. That means they must now write off the expenses over five years for U.S.-based R&D, or 15 years for foreign R&D expenses.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
Large and small companies alike are affected by the change, but small businesses are hurt the most, Orn said.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
\u201c(Small businesses) are the ones who are swinging into profit where they thought they were like safely losing money and not ever going to pay taxes for a while,\u201d Orn said. \u201cAnd that\u2019s why it\u2019s such a big surprise for them. It\u2019s hurting people, it\u2019s like it\u2019s a lot of money these companies don\u2019t have.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
Avoid underpayment penalties<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/h3>\n
Yet another reason for small business owners to use a tax professional is the fact that underpaying will cost more this year. In the past, underpayment penalties hovered at around 3%, but this year they\u2019re more than double\u00a0<\/span>at 8%<\/span>. That\u2019s because the penalties are based on the federal short term interest rate plus three points, said Danny Castro, Florida market tax leader at BDO USA, part of BBO Global, a global accounting network.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
\u201cT<\/span>he cost of underpayment is as high as it\u2019s been in a long time,\u201d he said.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
One credit to skip: the ERC<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/h3>\n
At one time, the pandemic-era Employee Retention Credit seemed like a boon for small businesses. Designed to help small businesses keep employees during pandemic-era shutdowns, the generous credit let businesses file amended tax returns to claim the credit.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
But that led to a\u00a0<\/span>cottage industry of scammers<\/span>\u00a0trying to entice small businesses to help them file for the credit \u2013 for a fee \u2013 even if they didn\u2019t qualify. The IRS has launched several initiatives to claw back some money improperly given to businesses. To date, the IRS said 500 taxpayers have given back $225 million via a voluntary disclosure program, which ended on March 22, that let small businesses who thought they received the credit in error give back the money and keep 20%. And 1,800 businesses have withdrawn unprocessed claims totaling $251 million.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
Get organized, stay organized<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/h3>\n
The best thing small businesses can do to help their tax advisers file their taxes is stay organized. A shoe box full of receipts isn\u2019t helpful when trying to file timely taxes. Owners should log receipts in an orderly database they can turn over to their adviser. And stay on top of quarterly estimated payments.<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
\u201c(Small business owners) need to be able to keep accurate records throughout the year and not have to go back in April and go, gosh, what what was this receipt for,\u201d said Occams Advisory\u2019s Amber Kellogg, \u201cKeeping those, accurate records is very, very important.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n
Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.<\/span><\/span><\/p>\n<\/div><\/div>\n
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\nAuthor: amyc<\/p>\n","protected":false},"excerpt":{"rendered":"
By Mae Anderson One tax professional recommends filing for an extension due to pending tax legislation in Congress. Most experts recommend small business owners work with a professional tax advisor. NEW YORK \u2013 As Tax Day approaches, there are plenty of things small business owners should keep in mind when filing taxes this year. April 15 is still the annual tax deadline for many small businesses although, unlike individuals, small businesses can have varying deadlines depending on the type of company, the state the taxes are filed in and other factors. Quarterly estimated tax payments are generally required throughout the year. And certain types of small businesses had to file by March 15. Since business tax filing is complex, most experts recommend small business owners work with a professional tax adviser rather than trying to file on their own or even with tax-filing software. \u201cTaxes should not be scary, especially when you have a certified tax professional or someone who is your trusted adviser,\u201d said Amber Kellogg, vice president of affiliate origination and management at business consultancy Occams Advisory. \u201cI always say you don\u2019t go to the dentist to get your oil changed, and you certainly shouldn\u2019t do (taxes) yourself unless you\u2019re an expert.\u201d But even if small business owners aren\u2019t filing taxes themselves, it\u2019s still important to stay informed about any tax changes during the year. Here are things small business owners should consider as the April 15 deadline looms. Consider an extension Because of some pending tax legislation in Congress this year, Mitch Gerstein, senior tax adviser at accounting firm Isdaner & Co., said it might be a good idea to file for an extension. When you file an extension, you still pay estimated taxes, but final paperwork isn\u2019t due until September. This gives your tax provider adequate time to file a return. And it\u2019s cheaper to file an extension than an amended return, which costs more in administrative fees. One reason Gerstein recommends an extension this year: a bonus depreciation write-off used by many small businesses is set to decrease for 2023. The bonus depreciation allowance was designed to spur capital purchases and it let businesses write off 100% of certain new and used assets in 2022. But beginning in 2023, that will decrease to 80% for used assets, dropping another 20% each year thereafter. However, a tax bill pending in Congress could restore the write-off to 100%. It\u2019s rare that there is such a significant tax bill pending in Congress when taxes are due, Gerstein said. Optimize your retirement plan The Secure Act 2.0 passed by Congress in late 2022 gives small businesses some tax advantages if they offer a retirement plan. There\u2019s a tax credit for small businesses starting new employee plans. The credit is up to 100% of the startup costs for adopting and maintaining a new 401(k) plan, capped at $5,000. There\u2019s also a tax credit based on employer contribution, up to $1,000 annually per employee, over the plan\u2019s first five years. Changes in research and development write-offs Scott Orn, chief operating officer of Kruze Consulting, works with startups backed by venture capital. Orn said the number one concern his clients are calling about is \u201cSection 174,\u201d a part of the tax code that involves writing off research and development costs. In the past, companies were able to deduct 100% of research and development expenses from their taxable income. That was helpful because often that deduction meant the company was operating at a loss and wouldn\u2019t have to pay taxes. But starting in 2022 due to new legislation, companies have had to \u201ccapitalize\u201d the expense \u2013 or spread it out over several years. That means they must now write off the expenses over five years for U.S.-based R&D, or 15 years for foreign R&D expenses. Large and small companies alike are affected by the change, but small businesses are hurt the most, Orn said. \u201c(Small businesses) are the ones who are swinging into profit where they thought they were like safely losing money and not ever going to pay taxes for a while,\u201d Orn said. \u201cAnd that\u2019s why it\u2019s such a big surprise for them. It\u2019s hurting people, it\u2019s like it\u2019s a lot of money these companies don\u2019t have.\u201d Avoid underpayment penalties Yet another reason for small business owners to use a tax professional is the fact that underpaying will cost more this year. In the past, underpayment penalties hovered at around 3%, but this year they\u2019re more than double\u00a0at 8%. That\u2019s because the penalties are based on the federal short term interest rate plus three points, said Danny Castro, Florida market tax leader at BDO USA, part of BBO Global, a global accounting network. \u201cThe cost of underpayment is as high as it\u2019s been in a long time,\u201d he said. One credit to skip: the ERC At one time, the pandemic-era Employee Retention Credit seemed like a boon for small businesses. Designed to help small businesses keep employees during pandemic-era shutdowns, the generous credit let businesses file amended tax returns to claim the credit. But that led to a\u00a0cottage industry of scammers\u00a0trying to entice small businesses to help them file for the credit \u2013 for a fee \u2013 even if they didn\u2019t qualify. The IRS has launched several initiatives to claw back some money improperly given to businesses. To date, the IRS said 500 taxpayers have given back $225 million via a voluntary disclosure program, which ended on March 22, that let small businesses who thought they received the credit in error give back the money and keep 20%. And 1,800 businesses have withdrawn unprocessed claims totaling $251 million. Get organized, stay organized The best thing small businesses can do to help their tax advisers file their taxes is stay organized. A shoe box full of receipts isn\u2019t helpful when trying to file timely taxes. Owners should log receipts in an orderly database they can turn over to their adviser. And stay on top of quarterly estimated payments. \u201c(Small business owners) need<\/p>\n","protected":false},"author":4,"featured_media":9344,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts\/9367"}],"collection":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/comments?post=9367"}],"version-history":[{"count":0,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts\/9367\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/media\/9344"}],"wp:attachment":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/media?parent=9367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/categories?post=9367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/tags?post=9367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}