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tax to-do list

Your Tax To-Do List for the End of 2023

Tax Day is months away. We’re still in the middle of the holiday season, when business owners are prepping for the start of the new calendar year. New budgets. New marketing campaigns. New hires.

But while so much of your focus is on the next few weeks, right now is also exactly when small business owners need to take a few important steps ahead of the official tax season.

For one, you have a couple more weeks to lock in potentially lucrative last-minute tax savings. But you also have until the clock strikes midnight on Dec. 31, 2023, to make the 2023 tax season a little smoother.

What do we mean? Read on as we explain a few tax to-dos to check off your list before the ball drops in Times Square.

Know Your Deadlines

Depending on what kind of business you run, you might have 2.5 or 3.5 months from the start of the year to file your taxes.

Sole proprietorships, single-member LLCs, multi-member LLCs taxed as corporations, and all corporations that end their year on Dec. 31 all use the same filing deadline as individuals, which in 2024 falls on April 15. However, partnerships, multi-member LLCs and S Corps must file by March 15.

Get the Family Involved

It’s never too late to make the tax code work for you. Hiring your children has always been a great tax strategy for a number of business structures, including sole proprietorships and single-member LLCs. However, it got even better under the 2018 Tax Cuts and Jobs Act, which, through 2025, allows an employee-child to shelter as much as $12,400 of their annual wages from federal income tax. If you pay your child even more, they’ll still pay taxes at a reduced rate. Also, children under age 18 don’t have to pay Social Security, Medicare or federal unemployment tax. So, putting your kids on the payroll can still pay off if you do so quickly.

Defer Income

Remember: You only pay income tax on wage in the year those wages are received. So, if you’re getting a year-end bonus, ask if it can be deferred in the new year. If you’re a contract worker or freelancer who regularly sends invoices, delay those invoices until late enough in December that you know they won’t be paid until January.

Obviously, you’ll still have to pay taxes on the deferred wages next year. But if you just need a one-time savings on your taxes, this is one way to go about it.

Prepay Expenses

This last-minute tax break is the ultimate example of having to spend money to save money. The “12-month rule” allows you to pay for something this year that will be in effect next year, and deduct it this year, as long as those benefits don’t extend beyond the earlier of the following: “12 months after the right or benefit begins, or the end of the tax year after the tax year in which payment is made.” So, let’s say you pay $10,000 on Dec. 30, 2023, for an insurance policy that goes from Dec. 31, 2023-Dec. 30, 2024. That full $10,000 is deductible in 2023.

Other Deductions and Breaks

You can also look into locking in a few other deductions, credits and other tax breaks. For instance, you might be able to deduct health insurance premiums if you’re self-employed, space in your home that’s used for working, even ATM fees if you withdrew money related to your business.

And if you started a company this year, you can deduct costs paid or incurred for creating the business (or even investigating the creation or acquisition of a business). Examples of such costs:

  • Ads declaring you’re open
  • Travel and related costs for securing prospective distributors, suppliers or customers
  • Salaries and wages for employees who are being trained

Organize Your Documents

Don’t wait to get your paperwork together. If you don’t already organize your receipts, mileage and other vital business documentation, start doing so. Digitizing these items is one of the easiest ways to stay organized. But even if you’re just dealing with paper, having these in one place now will save you (or your tax preparer) a headache in a few months.

Double-Check Your Payroll Totals

A quick way to get the IRS’s attention is to run inaccurate payroll. If the number you provide on 940s and 941s throughout the year isn’t the same as what’s reported on W-2s, an audit could be in your future. Yes, having to submit an adjusted 940/941 might be a pain. But compared to the alternative, it’s a stroll in the park.

Talk to a Professional Tax Adviser

What’s the best strategy for buying holiday presents — shopping earlier in the season to make sure you get everything on your list, or waiting until the last minute when many of those gifts might not be available? The same logic goes for hiring a professional tax adviser. If you call now, you’re likelier to find a tax pro with room on their client roster than if you wait until March or April.

Set yourself up for success in the new year, whether that’s simply being a step ahead on your taxes, or working with McManamon & Co. to position yourself for tax savings in 2023, 2024 and beyond. Call us at 440.892.8900 or contact us online.

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