As Tax Day approaches, small business owners are gearing up to file their taxes for the year. With varying deadlines depending on the type of company and state regulations, it's crucial for business owners to stay informed about key tax considerations.
1. Filing Deadlines and Extensions
While April 15 remains the annual tax deadline for many small businesses, certain types of businesses had to file by March 15. Experts recommend working with a professional tax adviser to navigate the complexities of business tax filing. Consider filing for an extension, especially this year, due to pending tax legislation that could impact bonus depreciation write-offs.
2. Retirement Plan Optimization
The Secure Act 2.0 offers tax advantages for small businesses that offer retirement plans, including tax credits for starting new employee plans and employer contributions.
3. Changes in Research and Development Write-Offs
New legislation requires companies to spread out research and development expenses over several years, impacting small businesses the most. This change has financial implications for companies previously deducting 100% of R&D expenses.
4. Underpayment Penalties
Underpayment penalties have increased to 8% this year, making it crucial for small business owners to accurately estimate and pay their taxes to avoid additional costs.
5. Employee Retention Credit (ERC)
Small businesses should be cautious about claiming the ERC, as improper filings could lead to penalties. The IRS has initiated efforts to recover funds from businesses that received the credit erroneously.
6. Organization is Key
Staying organized throughout the year by maintaining accurate records and tracking receipts is essential for a smooth tax filing process. Small business owners should log receipts in an orderly database and stay on top of quarterly estimated payments.
By staying informed and proactive, small business owners can navigate the tax season effectively and ensure compliance with changing tax regulations.
