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Your Tax To-Do List for the End of 2022

We realize that April 15 is quite a long way away. We also realize we’re still in the midst of the holiday season, so it’s probably a busy time for many of you.

But right now is exactly when small business owners need to take a few important steps ahead of the official tax season.

Yes, we realize that just a few days doesn’t seem like enough time to realize tax savings and get your tax affairs in order. But you have until the clock strikes midnight on Dec. 31, 2022, to make the 2022 tax season a little smoother … and a little more friendly to your finances.

Here are a few end-of-the-year tax to-dos you can get out of the way before Jan. 1.

Know Your Deadlines

You might have 2.5 or 3.5 months from the start of the year to file your taxes. It depends on what kind of business you run. 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 2023 falls on April 18. 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 or 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.

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, 2022, for an insurance policy that goes from Dec. 31, 2022-Dec. 30, 2023. That full $10,000 is deductible in 2022.

Other Deductions and Breaks

You can 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

Get Your Documents Organized

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 Christmas 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 2022, 2023 and even further in the future. Call us at 440.892.8900 or contact us online.

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