Tax law is daunting and ever-changing, making it especially tricky to navigate for first-time small-business owners who don’t have much time to devote to tasks outside of the realm of everyday business. Ponying up the funds to pay a seasoned tax professional can also be stressful for small- and mid-size businesses (SMBs) doing their best to make ends meet.
Understanding tax deductions that work to the advantage of SMBs is critical and can often provide a lifeline of “found money” for small businesses, especially during times of economic volatility.
According to the Office of Advocacy of the U.S. Small Business Administration, 99.9% of American businesses count as a small business, employing 46.4% of private sector employees and accounting for 62.7% of net jobs created since 1995. It’s then understandable that the IRS has created a number of tax credits and incentives for them to leverage. However, navigating these incentives and credits on a year-to-year basis can be extremely time-consuming, as there are often new incentives being introduced, tweaks to existing incentives and credits that expire or are phased out after a set period of time.
SMBs should create a timeline to give themselves the proper amount of time over the course of the year to make sure they address all of these possible scenarios and plan their finances accordingly. Below are a few tips and tricks I recommend to SMB owners looking to make the most of what’s available to them.
Expiring Tax Credits And Incentives
Every year, the IRS phases out certain tax credits and incentives that have been introduced. Usually, these are tied to very specific economic moments in time, like the pandemic or times of economic volatility. While SMBs can often file for these credits and incentives after they end, they need to make sure that the financial actions that are required to meet their requirements are taken before they expire.
As SMBs wind down each year, it’s a good practice to work with their trusted tax professionals to identify any of these credits and incentives that might help them in the future and decide whether it makes sense to allocate a budget for them before the end of the year.
For example, an expiring 2023 benefit includes a tax deduction for purchasing an SUV, pickup or van over 6,000 pounds. Not every SMB will need this type of benefit, but for those that have been considering this type of purchase, it’s important to have spent the time to research the eligibility requirements and to make sure time and budget are allocated to make that purchase prior to the end of the year. And there are a number of similar credits and incentives to consider.
Existing Tax Credits And Incentives
While less time-sensitive, there is an ever-evolving number of existing credits and ince…
