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Archives for February 2023

Recent Ballot Measures That May Affect Business Taxes

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As a business owner, it is important to stay up to date on the latest ballot measures that could affect your taxes. Keeping informed of these measures can help you better prepare for future tax changes and maintain a healthy financial plan. Recent ballot measures that may affect business taxes have been proposed in various states across the country, so it is important to understand what might be in store for your business. Big Changes to Federal Business Income Taxes Some of the largest ballot measures and legislative changes that may affect business taxes stem from the 2022 Inflation Reduction Act (IRA) and the expiration of certain provisions in the 2017 Tax Cuts & Jobs Act (TCJA). The TCJA also allowed for full capital expensing for businesses from 2017 to 2022. On January 1st, 2023, that deduction was decreased by 20% and will continue to decrease gradually until 2027. Income tax brackets have been adjusted for inflation for the tax year 2023. For more information, check out our recent article on the topic. These changes are placing heavier burdens on businesses in the 2023 tax year. But, many state-level initiatives are being implemented as well. These things will aim to even things out and help businesses counteract their heavier federal tax responsibilities. State Changes That May Affect Business Taxes Before we start here, we want to make it clear that this article is not an exhaustive list of every state’s tax code changes for 2023, and we also want to remind taxpayers that there are likely to be more changes to your state’s tax code before the year is up. It’s important to stay up to date on current tax initiatives and legislation. You can do this by regularly checking the IRS website and your state government websites, or you can reach out to a trusted tax professional throughout the year. With that said, here are some of the biggest tax changes we’ve found that will affect certain states and businesses within them in …

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4 Common Small Business Tax Mistakes

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As a small business owner, it is essential to understand your tax obligations and stay on top of filing deadlines. Unfortunately, mistakes can happen, and it is wise to be aware of the most common issues that arise when filing taxes for your business. In this article, you will learn about the most common small business tax mistakes so you can take proactive steps to avoid them. Knowing what to look out for can help save you time and money when preparing your taxes. Procrastination With the tax season in full swing, it is important for small business owners to stay informed and up to date on their taxes. Unfortunately, many small business owners make common mistakes when filing their taxes that can be easily avoided. One of the most common business tax mistakes is procrastination. We know, there are very few people – especially business owners – who jump for joy once tax season hits. But it’s important to think about your tax season the same way you think about your business plans: even if you are living your dream of running a business you love, there will be things you don’t like doing. And you can’t put those things off until the last minute and expect the rest of your operations to run smoothly. The same is true with your taxes. In fact, when you file your taxes and your information returns early, you make it easier on yourself and the recipients of those forms to find new ways to make the most of this tax season. Not Verifying Vital Information This is one of the more obvious mistakes that so many of us make, and so few of us think we will make. It’s tedious, but a major mistake that millions of tax filers make every year is not verifying vital information on every single document page. You should always take the time to double-check that the correct name, Social Security Number, and date of birth are on your forms. The same is true for your business information, TIN, and related identifiers. The only thing worse than filing taxes is having …

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How to Protect Your Taxes from Identity Theft

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Tax season can be a stressful time, but it’s also an opportunity to maximize your financial security in order to protect your taxes from identity theft. Tax identity theft is a growing concern in the United States, and as technology advances so do the potential for criminals to access your personal information. Fortunately, there are ways to safeguard your taxes from identity theft and secure peace of mind throughout tax season. Understanding the risks and taking proactive steps to protect yourself is key in preventing any potential data breaches. True IRS Communication about Tax Information is Always Via USPS The first tip to protect your taxes from identity theft is to remember that any true IRS communication is going to come through the United States Postal Service. You will never get texts, emails, social media communication, or automated or representative calls. Watch Your Credit Get a credit monitoring service and check it faithfully. Often, the first signs of identity theft, tax-based or otherwise, will pop up on those frequent credit reports. When you see those changes, you can then take immediate action to lock down your accounts and safeguard other sensitive information that may not have been stolen yet. Keep Personal Information Private Numbers and account information for key business, personal, and financial information should always be kept private whenever possible. Your Social Security number (SSN), Tax Identification Number (TIN), and other sensitive information can easily be stolen if you are carrying it around with you, either in a physical card or as a digital copy on your smartphone, tablet, or another electronic device. Most often, this type of information is stolen when you choose to share it with someone you trust. Your spouse should not be keeping a digital record of your SSN, for example, without having that information password protected. Even writing the information down for a friend (in an emergency or some unexpected …

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What Is the Alternative Minimum Tax?

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IRS's inflation updates for revenue procedure also affected the Alternative Minimum Tax exemption. The Alternative Minimum Tax (AMT) is an important concept in the realm of taxation. It can have a significant impact on one's tax liability and should not be overlooked. Let’s talk about what the AMT is, who has to pay it, and how it works. Alternative Minimum Tax: The Basics The AMT is a type of tax that certain taxpayers must pay in addition to their regular income taxes. It was created to ensure that taxpayers with higher incomes pay at least a minimum amount of taxes. Think of it as a tax floor – just as each tax bracket has a floor (minimum threshold) and ceiling (maximum threshold), your ability to deduct and use credits to lower your tax liability also has a lower limit. It exists in parallel to the traditional tax system and can result in higher federal income taxes for certain taxpayers. For example, high-income individuals may be required to pay more taxes under the AMT than they would have under a standard calculation. Understanding how the AMT works and when it applies is vital for any taxpayer facing these potentially higher taxes. When you pay an AMT, some or all of that additional tax is going to be put toward future income that will be taxed due to differences in the rules. In that instance, you’ll be eligible for a credit that you can use to cover your future tax liabilities. Why is there an alternative minimum tax? You’d have to go back to 1969. That year, 155 people with high incomes were able to use enough tax deductions to completely avoid paying anything in taxes. What Triggers AMT? The AMT is triggered by high household income, large capital gains, and certain stock options. If you have exercised certain stock options as an employee, this capital will only be taxable under the AMT if the paper profit of those options is high enough by the rule’s calculations. This includes stock options you have not sold. When you are …

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