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Small Business Priorities

By: Tax Hotline
Winter 2023 (Vol. 40, No. 4)

Organizing and reconciling your financial records is crucial at tax time but successful businesses make it a priority all through the year. Up to date financial records are essential for helping you monitor the progress of your business and where changes or improvements are required. If you apply for a loan, grant or other assistance, the first thing that will be required is a proof of your financial health. Here’s a general list to help you ensure your small business has the tools you need to succeed.

1. Don’t wait until tax time to catch up. Your business bank and any other financial accounts should be reconciled and reviewed by you every month. You can outsource to a bookkeeping service or do it yourself or use a popular accounting software like QuickBooks, Xero or FreshBooks.

2. Your structure. A sole proprietorship works for a small operation just starting out. But as your business grows, you may need to convert to an LLC or S corporation. Changing your business form can make a big difference in your tax and other liabilities so be sure to consider all aspects before choosing. Don’t forget to file your annual report to keep your entity active. The late filing penalties can be triple the price of filing on time.

3. Make a calendar detailing important due dates. To avoid penalties, stay up to date with any reports you are required to file and don’t be late on sales tax and payroll tax payments. Don’t forget local and state licenses and entity renewals. These are some key tax calendar dates to watch for in 2023.

  • Jan. 31, 2023: Deadline for any employees or independent contractors you hired last year to receive their W-2, 1099-NEC, or 1099-MISC tax forms.

  • March 15, 2023: Deadline to file business tax returns for partnerships, S corporations, or LLCs that are taxed as partnerships.
    Deadline to file Form 2553 to switch your business election to an S corporation (S corp) for tax year 2023.

  • April 18, 2023: Deadline for C corporations, sole proprietorships (Schedule C), single-member LLCs or LLCs taxed as corporations, and individuals to file their tax returns.
    Last day for you to make 2022 contributions to traditional and Roth IRAs.

  • Sept 15, 2023: Deadline to file If you received a filing extension on your return for partnership, S corp or LLCs that are taxed as partnerships.

  • Oct. 16, 2023: If you received a filing extension on your 2022 income tax return, your extended individual return is due on this date.

4. Your income and expenses. Keeping a close watch on what’s coming in versus what’s going out is a must. When it comes to income, don’t forget to count every source including employment income, personal services income, bank interest, dividends, capital gains, employee stock options (exercised or sold), investment income, government payments, prizes and awards.

Tracking your expenses is doubly important because these may also become deductions. A deduction could be any expense that is directly related to earning your income. Check expenses every month and make sure you have a receipt or other proof that these costs occurred. The list of possibilities is long but typical deductions include vehicle, travel, entertainment, food, supplies, tools, equipment, postage, utilites commissions, bank fees, licenses and legal.

5. Your home office expenses. If you work from home, you may be able to claim deductions related to the cost of working from your home. These include items such as additional electrical, phone, and internet expenses.

The home office deduction is only available to business owners who have a dedicated office space in their home primarily used for business purposes.

6. Business Mileage. Keep a log to track your business mileage. The 2022 mileage rate was 58.5 for Jan 1 to June 30, 2022 and then went to 62.5 cents per mile for the remainder of the year. The rate jumps to 65.5 for 2023.

7. Your estimated quarterly tax payments. If you find you will need to prepay your taxes, make a note of these important due dates: Q1 – April 15th, Q2 – June 15th, Q3 – Sept 15th, Q4 – January 15th of the following year.