For business owners, being aware of new business tax laws, legislation and obligations is crucial to planning for the year ahead and minimizing tax liabilities.
Before meeting with your tax professional, read our guide that outlines key tax changes in 2023 that could impact your business.
SECURE Act Updates That Affect Pension Plan Startup Costs
The SECURE Act has nearly one hundred provisions that discuss retirement savings plans. One change is the increase in Section 45E credit for all or a portion of employer contributions to small employer pensions for the first five employer tax years, starting in 2023. The credit for employer contributions is capped at $1,000 per employee, and the new updates allow for credit to be available to employers with fifty or fewer employees and is phased out completely for employers with more than a hundred employees. Additionally, the existing tax credit for qualified plan start-up costs for employers with no more than fifty employees is increased from 50% to 100% of such costs, starting with the 2023 tax year. Learn more about new changes made under the SECURE 2.0 Act of 2022.
Certain Businesses May Receive Higher Federal Tax Bills
The 2022 Inflation Reduction Act (IRA) and removal of temporary provisions in the 2017 Tax Cuts and Jobs Act will mean that in 2023, the federal government is placing more financial responsibility on businesses. However, Section 179D significantly increases the energy-efficient commercial building deduction, making it especially useful for the architecture, engineering, and construction (AEC) industries as well as commercial building owners. Also, some states have provided state-level tax cuts to provide relief to this change. Find out if your state is one of them.
New 1099-K Form Rules Postponed for One Year
According to the American Rescue Plan Act of 2021 (ARPA), beginning in tax year 2022, small business owners and freelancers who received more than $600 from third-party digital platforms were scheduled to receive Form 1099-K and report that income. Platforms such as Amazon, Etsy and eBay were also obligated to report this income to the IRS. While a postponement was declared after much pushback from businesses, businesses that fall under the requirements will receive a Form 1099-K in 2024 for the 2023 tax year. See what the IRS has to say about these new income reporting rules.
Be Aware of the SALT Cap
The state and local SALT tax cap states that since 2020, filers can deduct only up to $10,000 in state and local property and income taxes. Business owners who operate a pass-through entity in a high-tax state may find their deductions limited by SALT rules. However, recently a group of House representatives relaunched the SALT causus for last week, calling for relief from the $10,00 limit on the federal deduction for state and local taxes. Learn more about the SALT Cap.
Additional 2023 Inflation Adjusted Items
Take note of these additional inflation-adjusted updates that could have implications on your business 2023 taxes.
These are just some of the tax updates taking place in 2023. If this seems overwhelming, then we have good news – we are here to help! Contact us today if you would like direct assistance in preparing for the tax year ahead and our experienced experts will provide you with personalized tax strategy that helps your business find opportunities that enable growth.