Entrepreneurs and taxes: How expenses are claimed on tax returns
While some businesses have closed since the start of the COVID-19 crisis, many new ventures have launched. If you’ve recently started a new business, or you’re contemplating starting one, be aware of the tax implications. Not all start-up expenses can be deducted on your federal tax return right away. Some expenses probably must be amortized over time. You might be able to make an election to deduct up to $5,000 currently, but the deduction is reduced by the amount by which your total start-up costs exceed $50,000. You can also deduct $5,000 of the organizational costs of creating a corporation or partnership. Contact us. We can help with the tax and other aspects of your new venture.
Using B2B media to lengthen your marketing reach
Marketing is tough for companies that sell products or services to other businesses. You must not only persuade customers to buy from you, but also communicate that you’re an expert in your industry or field. Getting involved in business-to-business (B2B) media can help. For example, send out press releases announcing new hires, products or services, or other developments. Or you could write bylined articles for selected industry publications. Just make sure they don’t read like free advertisements. You might also bypass traditional media outlets and focus on blogging and social media. If you do, set an editorial calendar and stick to it. Contact us for help assessing B2B marketing costs.
Numerous tax limits affecting businesses have increased for 2022
A number of tax limits affecting businesses are annually indexed for inflation and many have increased for 2022. For example, the Section 179 expensing limit has gone up to $1.08 million from $1.05 million in 2021. Health Savings Account (HSA) contributions for individual coverage have increased to $3,650 (from $3,600). HSA family coverage contributions increased $100 to $7,300. Employees can contribute $20,500 to a 401(k) plan in 2022 (up from $19,500). 401(k) “catch-up contributions” are $6,500 (unchanged from 2021). And the deduction for business-related meals and beverages provided by a restaurant is 100% for 2022 (and 2021). We can answer any questions about taxes and your business.
Help safeguard your personal information by filing your 2021 tax return early
The IRS is opening the 2021 individual income tax return filing season on Jan. 24. Even if you usually don’t file until closer to the April deadline (or you file an extension), consider filing early. It can potentially protect you from tax identity theft. In these scams, a thief uses another person’s personal information to file a fraudulent return early in the filing season and claim a bogus refund. Another benefit of early filing is that if you’re getting a refund, you’ll get it faster. And if you were eligible for an Economic Impact Payment or advance Child Tax Credit payments last year and didn’t receive them, you can claim them on your 2021 return.
3 specialized IT leadership positions for growing businesses
Many businesses employ Chief Information Officers, Chief Technology Officers and Chief Digital Officers. But there are more specialized IT leadership roles to consider: 1) A Chief Information Security Officer to oversee ongoing data security efforts and monitor developing threats. 2) A Chief Technology Innovation Officer to identify opportunities for innovation and lead initiatives to accomplish chosen objectives. 3) A Chief Marketing Technologist to recommend new solutions and oversee the use of existing marketing tech. Whether at the C level or a more junior management level, these positions call for expenditures in hiring, payroll and benefits. We can help you explore their feasibility.
How will revised tax limits affect your 2022 taxes?
While Congress didn’t pass the Build Back Better Act in 2021, there are still tax changes that may affect your tax situation for this year. That’s because some tax figures are adjusted annually for inflation. It’s a good idea to familiarize yourself with tax amounts that have changed for this year. For example, the amount you have to earn in 2022 before you can stop paying Social Security on your salary has increased to $147,000 (from $142,800 for 2021). In 2022, you can contribute up to $20,500 to a 401(k) plan (up from $19,500 in 2021). You can contribute another $6,500 catch-up amount to a 401(k) if you’re age 50 or older. Contact us if you have questions or need more information.
Businesses with employees who receive tips may be eligible for a tax credit
Are you an employer who owns a business where tipping is customary for providing food and beverages? You may qualify for a valuable tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income. You claim the credit as part of the general business credit. It’s equal to the employer’s share of FICA taxes paid on tip income in excess of what’s needed to bring your employee’s wages up to $5.15 per hour. In other words, no credit is available to the extent the tip income just brings the employee up to $5.15 per hour, calculated monthly. Other rules may apply. If you have any questions, don’t hesitate to contact us.
Business owners, do you need to step up your internal communications game?
Whether because of “the Great Resignation” or continuing pandemic-related anxieties, the labor market remains tight. This is putting pressure on business owners trying to keep and hire workers. One element that can make or break your employer brand is internal communications. Do you need to step up your game? Start by listening. Solicit employee feedback through a suggestion box or anonymous online tool. Hold town hall meetings in which you directly answer questions. Visit different departments or facilities to stay visible. Consider shadowing various employees for a day to learn about their jobs. Above all, manage your internal profile like the critical asset that it is.
Are you eligible for a medical expense tax deduction?
You may pay out a bundle in out-of-pocket medical costs. But can you deduct them on your tax return? It’s possible but not easy. Medical expenses can be deducted only to the extent unreimbursed costs exceed 7.5% of your adjusted gross income. Plus, medical expenses are deductible only if you itemize, which means that your itemized deductions must exceed your standard deduction. Eligible costs include hospital and doctor bills and many others. For example, they include: health insurance premiums, eyeglasses, hearing aids, most dental work, prescriptions, smoking-cessation programs and some costs of transportation to get to medical appointments. We can assess if you qualify for a deduction.
Defer tax with a like-kind exchange
Do you want to sell commercial or investment real estate that has appreciated significantly? One way to defer a tax bill on the gain is with a Section 1031 “like-kind” exchange where you exchange the property rather than sell it. With real estate prices up in many markets (and higher resulting tax bills), the like-kind exchange strategy is attractive. A like-kind exchange is any exchange of real property held for investment or for productive use in your trade or business for like-kind investment, trade or business real property. Like-kind exchanges can be a great tax-deferred way to dispose of real property. Contact us if you have questions or would like to discuss the strategy further.