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4 Ways Businesses Can Save on Taxes in 2022

By |2022-06-09T14:02:33-07:00June 9, 2022|Categories: Business Taxes|Tags: , , , |0 Comments

Every cloud has a silver lining. That’s especially true of the clouds that gather around business owners near tax time (which happens to be all the time, by the way). The tax code is highly complex.

According to one estimate, the federal tax code — at a whopping 2,652 pages — is 187 times longer than it was a century ago. The silver lining to all this? Within that highly complex tax code are the keys to the kingdom: unlocking enormous tax savings.

This is especially true for businesses, because government organizations at the federal, state, and local levels all want to stimulate business development. They know their funding is tied directly to the profits and personal income that those businesses generate. And the primary way governments stimulate business is by offering tax breaks and incentives.

Tax Forms for Businesses

As a business owner, you can capitalize on those tax breaks by 1) knowing about them and 2) taking full advantage of them over the course of the tax year. That means not waiting until April 15 of the following year, when it may be too late.

In this post, we address four areas of focus for reducing your business taxes in the 2022 tax year. We also want you to consider asking your CPA or tax planning firm about scheduling a mid-year meeting for your business, because the steps you and your CPA take now will pay dividends in the Spring of 2023!

First up is a section of the tax code that allows you to deduct the cost of certain types of property as an expense, rather than requiring that the cost of the property to be capitalized and depreciated.

Section 179 Expense and Bonus Depreciation

The U.S. tax code provides different methods for writing off the cost of new or used machinery or equipment. Consider the following four options: Continue reading… Continue reading… Continue reading…

Taking Advantage of the Work Opportunity Tax Credit (WOTC)

By |2021-11-03T15:39:33-07:00November 3, 2021|Categories: Business Taxes|Tags: |0 Comments

Need an incentive to hire a veteran or someone from an underserved demographic? You need to know about the Work Opportunity Tax Credit (WOTC) — a federal tax credit of up to $9,600 for employers who hire people from specific groups facing significant barriers to employment. (Tax-exempt employers can claim the WOTC against their payroll taxes.)

The WOTC creates an incentive for business owners to increase workplace diversity while providing the unemployed and underemployed with access to good jobs. If you’re a business owner or you manage a business for someone else, the WOTC provides you with the opportunity to grow your workforce at a discount as the economy recovers.

Jointly administered by the Internal Revenue Service (IRS) and the Department of Labor (DOL), the Work Opportunity Tax Credit is available for wages paid to certain individuals who begin work on or before Dec. 31, 2025. Under this program, participating companies receive a tax credit of between $2,400 and $9,600 per new qualifying hire.

Best of all, originally scheduled to expire at the end of 2020, the Consolidated Appropriation Act (CAA) extended the WOTC through December of 2025.

Screening Job Applicants

To take advantage of the Work Opportunity Tax Credit, you’ll need to screen applicants to ensure that they qualify. To qualify, employees must meet the following criteria:

  • Be a new hire, not an existing employee or previous employee being rehired
  • Belong to one of the qualified groups (see list below)
  • Perform at least 400 hours of service for the employer (employees who perform at least 120 hours of service may qualify for a partial credit)

Warning: Note that an employee’s wages cannot be used for both the WOTC and the COVID-19 employee retention credit. The same wages cannot be counted twice.

To screen job applicants, create a WOTC questionnaire that they must complete and submit with their application. Your WOTC questionnaire needs to collect details that enable you to determine whether an applicant is a member of one of the qualifying groups: Continue reading… Continue reading… Continue reading…

First Look: The Biden Administration’s Proposed Tax Law Changes

By |2025-07-10T10:37:58-07:00July 9, 2021|Categories: Business Taxes, Tax Credits, Taxes|Tags: , , , |0 Comments

When a new administration settles into the White House, you can be certain there will be proposals to change the nation’s tax code. And as Walt Disney once famously said, times and conditions change so rapidly that we must keep our aim constantly focused on the future. And that’s the aim of today’s post.

The fact that the Biden administration is planning to raise taxes is no surprise. The President campaigned on a promise to raise taxes on corporations (from 21 to 28 percent) and on wealthy Americans (those earning more than $400,000 per year). If you ever complained that politicians never follow through on their promises, this is the one exception — the Biden administration will raise taxes. The only question is how?

In late May 2021, the U.S. Treasury Department presented a sneak peek into the administration’s proposed tax law changes in the form of a 114-page document commonly referred to as the “Green Book.” The proposed changes are part of two plans — the American Jobs Plan, geared more toward businesses, and the American Families Plan, focusing on individuals. In this post, we explain many of the proposed changes and highlight how they might impact your taxes moving forward.

The key word here is proposed. It’s too early to tell exactly which proposed tax changes will become law or the extent to which they’ll be modified as they move through Congress. Regardless, here’s what we know about The American Jobs Plan and how it might impact businesses:

The American Jobs Plan

The primary objective of The American Jobs Plan is to create millions of jobs while rebuilding the country’s infrastructure and positioning the United States to out-compete nations like China. To raise revenue to pay for the plan, the administration is considering the following changes to tax law (note: generally, these changes would go into effect after the 2021 tax year): Continue reading… Continue reading… Continue reading…

Maximizing Your PPP Benefits and Employer Tax Credits

By |2021-03-04T11:04:33-08:00March 4, 2021|Categories: Business Taxes, COVID-19|Tags: , , , , , , |0 Comments

In 2020, Congress passed a flurry of COVID-19 related legislation designed to help employers retain and pay their employees and stay in business. This relief has been offered primarily in two forms:

  • Paycheck Protection Program (PPP): PPP loans have been made available to qualifying small businesses to help them stay afloat and retain and pay as many of their employees as possible. A business receiving a PPP loan can then apply to have the loan forgiven; that is, whatever portion of the loan was used for qualifying payroll and expenses.
  • Employer tax credits: Additional employer tax credits have been made available to help employers cover the cost of sick and family leave for employees, employees who need to care for someone with coronavirus (including a child whose school or daycare is closed due to the coronavirus), and retaining employees when operations have been partially or fully suspended due to government orders during the pandemic.

Understanding and taking full advantage of these benefits within the parameters stipulated in the legislation can be challenging for small-business owners. At SWC, we’re here to help.

In this post, we provide an overview of the COVID-19 pandemic relief programs for which your business may be eligible. When preparing your business tax returns this year, your accountant or CPA should be asking you for copies of payroll tax returns and should be initiating additional consultations with you to see if you are eligible for any of the new employer tax credits. We say should because that’s how we handle this at SWC.

Wait! Before You File Your 2020 Tax Return, Read This

Don’t rush to file your 2020 tax returns. Consult with us first for three important reasons:

  1. Both the PPP and the new employer tax credits provide potentially significant benefits for your business, and we want to make sure you reap the maximum benefit.
  2. The new employer tax credits cannot be claimed on the same payroll being used for the PPP loan forgiveness. When completing your tax return and submitting documents for PPP loan forgiveness, you need to be sure you’re not confusing the two benefits.
  3. Your state may not follow all the federal guidelines. We can help ensure that your state taxes account for any differences.

If you feel pressured to file your 2020 tax returns and are uncertain about any of the details related to the PPP or new employer tax credits, we strongly encourage you to file for an extension. With that recommendation in mind, it’s important that you take the time to consult with your tax advisor.

Sorting Out PPP Rounds 1 and 2

Congress provided two rounds of PPP loans — one in the spring of 2020 and another near the end of 2020. If you have taken advantage of the PPP, you should understand the rules and the differences between the two rounds (or “draws.”)

Important: The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted in March 2020, was silent on whether expenses paid with the proceeds of first draw PPP loans could be deducted. The IRS took the position that these expenses were nondeductible. However, the Consolidated Appropriations Act, 2021 (CAA, 2021), enacted at the end of 2020, provides that expenses paid from the proceeds of both first and second draw PPP loans are Continue reading… Continue reading… Continue reading…

The Return of IRS Form 1099-NEC

By |2020-12-03T14:57:56-08:00December 3, 2020|Categories: Business Taxes|Tags: , , , , |1 Comment

Over the past 40 years or so, large and small businesses alike have been using Form 1099-MISC (short for miscellaneous income) to report payments of $600 or more in a calendar year to independent contractors, freelancers, sole-proprietors, and other self-employed individuals. Prior to that, these same businesses used Form 1099-NEC (short for non-employee compensation) for that purpose.

Well, the IRS (Internal Revenue Service) is turning the clock back to the 1980s with the return of Form 1099-NEC.

IRS Form 1099-NEC

We can honestly say we didn’t see this one coming. In fact, we thought that the return of Form 1099-NEC was about as likely as, say, a third Bill and Ted movie. Well, we were wrong on both counts. And the funny coincidence is that the return of the 1099-NEC and the release of the third movie (Bill and Ted Face the Music) have both occurred in the same year — 2020, as if this year wasn’t already peculiar enough.

Taking a Closer Look at Form 1099 MISC

Before we look at what changed in 2020 regarding Form 1099-MISC, let’s take a look at what we have all become accustomed to for nearly four decades. Since 1982, businesses that have paid non-employees for their work have issued them a Form 1099-MISC in lieu of a W-2 form (required to report employee compensation).

For the past 38 years, most businesses have been using the 1099-MISC form to report any payments to independent contractors, freelancers, sole-proprietors, and other self-employed individuals who met any of the following three criteria: Continue reading… Continue reading… Continue reading…

Introduction to Small Business Guide to Legally Reducing Your Tax Burden

By |2020-10-08T21:00:37-07:00July 7, 2020|Categories: Business Taxes|Tags: |0 Comments

If you’re like most small-business owners, you launched your business with a great idea for a product or service and a passion for delivering it to consumers or other businesses. You were probably unaware at the time of the heavy burden of managing your business, especially the complex financials, and especially those related to taxes. Like other business owners, you most likely started out not even knowing what you didn’t know, and that is perfectly understandable.

Surely you can’t be expected to know what you haven’t been taught, right? Unfortunately, the government (federal, state, and local) and their corresponding taxing authorities do expect you to know and follow the tax code. You have probably heard the edict, “Ignorance of the law is no excuse.” It’s true. In fact, what you don’t know about the tax code can cost you dearly in both penalties (for non-compliance) and overpayments (for not taking full advantage of your eligible tax breaks).

Small Business Guide to Legally Reducing Your Tax Burden

Many small-business owners are so afraid of the Internal Revenue Service (IRS) or so terrified of making a mistake that they end up paying more than their fair share in taxes — sometimes a lot more. And that makes those of us at Stees, Walker & Company, LLP want to scream. Why? Because we know that while making money is hard, keeping it is fairly easy, as long as you know what you’re doing and choose to work with a tax and financial planning firm like ours. And, for the most part, all that involves is knowing the tax code and keeping good records, both of which are our areas of expertise.

One way we can help without it costing you any more than your time is to provide free guidance and insight. As part of that focus, we’re launching an 11-part series here on our blog on how to reduce your tax burden legally. Starting next week and over the course of the next three months or so, we will be posting one part per week, each focusing in on a single technique for reducing taxes.

Here’s what we’ll cover in each part: Continue reading… Continue reading… Continue reading…

© 2014- Stees, Walker & Company, LLP (SWC). All rights reserved.
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