Person sitting at their desk reviewing tax documents while holding a mug.

With tax season upon us, it's time to prepare your tax documents checklist. Small business owners know that now is the time for tax preparation for 2023. Whether you’re a seasoned business owner or you’ve just passed your one-year anniversary, you know that there’s a lot of planning that goes into running a successful business. As a small business owner, there’s a lot to juggle between marketing strategies, inventory, budgeting, and taxes. Wondering how to file small business taxes efficiently? Take some time to read up on these small business end-of-year tax tips to get a jumpstart on the upcoming tax season. Your future self will thank you for a smoother tax filing!

Small Business Tax Planning and Tax Preparation: What’s changed for 2023?

The COVID-19 pandemic has dominated headlines since it broke out in 2019. It’s no surprise that this year has brought a new topic of intense focus: inflation. 

From the gas pump to the grocery stores, inflation has impacted Americans a great deal. 

In November 2021, the IRS (Internal Revenue Service) announced its annual inflation adjustments for the 2023 tax year. Here are a few notable changes to consider for tax planning for small businesses:

  • Medical Savings Account: Individuals who are covered with this type of plan must have an annual deductible of at least $2,450, which is a $50 increase from 2021. The maximum deductible is $3,700, $100 more than the previous year.
  • Standard Deduction: This amount has increased for every type of taxpayer. The amount for married couples filing jointly is $25,900 (an $800 increase), and heads of households will have a standard tax deduction of $19,400 (a $600 increase). Single taxpayers and those who are married but filing separately have a standard deduction of $12,950, which is a $400 increase. 
  • Earned Income Tax Credit: The IRS has increased this amount to $6,935 for taxpayers with three or more qualifying children.

    • 4 Small Business End-of-Year Tax Tips for 2023

    Small business owners have a lot of day-to-day responsibilities when it comes to managing the finances of their businesses. In addition to small business bookkeeping, you might also need to understand how to run payroll if you have employees. There’s also the aspect of small business taxes, which can be quite complex for the average business owner. 

    When you calculate your small business taxes, the process will be easier if you follow some tax tips for small businesses. Consider the following practices to help ensure the process goes smoothly:

    1. Maintain Good Records

    Your tax prep would not go smoothly without concrete tax records. These records could help you calculate your estimated tax payment. Make sure you record your business expenses on a regular basis, regardless of the amount. Don’t wait until the end of the quarter or year to reflect on your spending on things like advertising or business-related travel. If you maintain detailed and accurate records and save related paperwork and receipts, you’ll have a much easier time deducting these expenses during tax season.

    2. Know Your Deductions and Credits

    Depending on the type of work you do, you may be entitled to a variety of tax deductions and tax credits. Self-employed folks and small business owners are often eligible to receive certain deductions and credits that sometimes get overlooked. It’s important to be aware of these items to maximize your savings.

    3. Beware of Scams

    Don’t fall victim to scammers who try to take advantage of taxpayers through various sneaky methods. Some common IRS scams involve criminals who impersonate the IRS, while other scams originate from the taxpayer who’s trying to avoid payment. The IRS releases an annual Dirty Dozen list of scams that are relevant to both taxpayers and tax professionals. 

    4. Work with a CPA

    Hiring a Certified Public Accountant (CPA) to handle your small business taxes is perhaps one of the smartest steps you can take. CPAs stay well-informed about current tax laws and regulations, so you won’t have to worry about missing critical details or deadlines. Outsourcing this critical component of your business can also help save money and allow you to spend time and energy on other important tasks. 

    FAQs for Small Business Tax Planning

    What is the best tax planning software for businesses? 

    There are many options if you want to take the DIY route for your business taxes, but the best option is to work with an accountant or CPA. Your business may have unique needs, and a CPA will ask the right questions to ensure your taxes are filed correctly. A CPA will also help you maximize your deductions and credits so you’re not overpaying or missing out on tax savings. 

    How do I calculate small business taxes? 

    Unlike individual taxpayers who pay yearly, many small business owners must pay quarterly estimated taxes. To do this, you’ll need to calculate a few different numbers, including your adjusted gross income (AGI), estimated total income, and taxable income. All of these will factor into your total estimated taxes, which you can divide by four to get your estimated quarterly tax payment.

    How much should a small business put back for taxes? 

    Unfortunately, there’s no simple answer for how much you should save for paying taxes. Taxes will vary depending on your location and business structure. For example, a C-corporation will have a different tax rate than a sole proprietorship. These tax rates can range from 10% to 37%, but remember that tax deductions and credits will also affect how much you’ll need to pay.

    Plan Your Small Business Taxes with 1-800Accountant

    These end-of-year small business tax tips can help put you on the right track for 2023. However, it’s ultimately a good idea to consult with a professional CPA. No two businesses are exactly alike, and it’s best to work with someone who understands the specific laws and regulations that will apply to your business. 

    The team at 1-800Accountant can advise you on your tax obligations and ensure you maximize your small business tax savings. 

    This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.