Ready for some yuletide cheer? Inflation might have hit its peak this year. So say the “experts.”
That particular category of people hasn’t exactly covered itself with glory of late … so, we’ll see how that actually plays out for businesses in the coming months.
What’s the price environment looking like for you within your industry right now? Curious to hear what you’d have to say.
We’d actually love to hear a broader picture about how your Indianapolis business is faring after the past couple of years of rising supply costs across the board. Do you need help examining where the dollars are going out and coming in? We can take a look with you to shore things up for success (and survival) in 2023.
Schedule a time with us here: helmscpa.com/book-an-appointment/
And, while we’re at it, we can also talk about how to help lessen your 2022 tax bill. Let’s start right here with these year-end business tax moves you can make before December 31st…
Helms’s 8 “Right Now” Business Tax Moves
“Time is money.” – Ben Franklin
It’s been yet another … interesting, to say the least, year to run a small business. We’ve tried to be there for you every minute — and we’re here today to let you know that it’s really not too late to improve your business tax situation for 2022.
Even now, you can make (or change) moves that you’ll thank us and yourself for when you file this year’s taxes for your company in 2023.
8 business tax moves to make RIGHT NOW
1.) Employee bonuses. Amid the holiday exuberance, take another pass at those holiday bonuses before you hand them out. You want to show gratitude, sure, but are you certain those bonuses won’t eat up cash you’ll need in 2023?
2.) Examine deductions. We urge you (and we’re happy to help) to review all your business activities for potential deductions in 2022. Use a fine-toothed comb and tune your eye to detail. Mention them to us — we make no guarantee, but you don’t want to leave any legit deduction on the table.
Ditto for tax credits like for research and development or, specific to some industries, energy credits or FICA tip credits. If you have real estate, start looking into cost segregation or, down the road, a like-kind 1031 exchange. It might be tough to pull the needed documents together in the days left this year, but at least we can start thinking about these questions.
3.) Equipment and Sec. 179. Buying equipment or machinery and putting it in service before this December 31 can get you a 2022 deduction under Sec. 179 (potentially a big one, too — but this isn’t always automatic and there can be conditions, so check with us).
4.) Tax-smart use of credit cards. Deductions can be taken as of the day of the purchase for credit cards used by a single-member LLC, by a sole proprietor who files a Schedule C, and by a corporation that uses a card that is in the corporate name.
If your Indianapolis business is a corporation and you are the personal owner of the credit card, the corporation has to reimburse you, and (for tax purposes) the deduction takes effect on the date of the reimbursement. Will that be before this December 31?
5.) Accelerate or defer. The tail-end of a year brings up a time-honored tactic: accelerating expenses and spending while cutting back on billing to defer income into next year. Thoroughly review your expenses. Which ones can you speed up? Were you planning on large outlays in early 2023 anyway? If so, moving them up a month or so could be workable. This is especially effective if your business uses cash-basis accounting.
(In fact, if you do use this accounting method and you can afford the money upfront, the IRS has a safe-harbor “12-month rule” that lets you deduct a prepaid future expense in the current year — but it can be tough to qualify for.)
A simpler and more common tactic: Don’t bill until January (assuming most of your clients and customers don’t pay until they’re billed). This defers income into the next tax year.
6.) Retirement and medical plans. It may not be too late to establish your company’s retirement plan. One of your quickest options might be a Simplified Employee Pension plan (SEP). You can deduct the lesser of your contributions (up to 61 grand per employee for 2022) or a quarter of the employee’s compensation.
Regarding your company’s medical plan, make sure as 2022 runs out that you have health insurance reimbursements recorded properly for tax deductions or credits.
7.) Pandemic loans and credits. The IRS says that if your Paycheck Protection Program (PPP) was forgiven based on “misrepresentations or omissions,” you can’t exclude the amount from your taxable income. Think now about an amended return. Ditto if you have any doubts about your eligibility for the legendary Employee Retention Credit that you might have applied for. Call us, please.
8.) Qualiﬁed Improvement Property. A QIP, if you have one, is a property eligible for special tax consideration. But to secure the QIP deduction in 2022, you need to place the property in service on or before December 31. Also, if you ﬁled a 2019 return that you haven’t amended and that involves the QIP, you still have a little time … but let us know.
It’s never too late — or early — to get the most out of your business tax situation. Before your Indianapolis company heads into another great new year, let us help you…
John R. “Rusty” Helms, C.P.A., CGMA