4 End-of-Year Tax Tips for Small Business Owners

Q4 is nearly at an end, and small business owners across the country are prepping for what they hope to be a lucrative new year. In terms of preparation, there’s a lot for entrepreneurs to do, like taking inventory, evaluating budgets, and refining marketing strategies. Of all the tasks you’re juggling, however, taxes are most likely at the top of your list. Take a few moments and read up on these year-end tax tips for small business owners so you’re ready to go for tax season.

To be fully prepared, however, we’ve got to take a trip down memory lane and touch on what’s changed for 2022 business tax planning.

What’s Changed for Small Business Tax Planning in 2022?

While the COVID-19 pandemic dominated headlines in 2020 and 2021, the topic of focus for 2022 is inflation. From the grocery store to the gas pump, inflation is making life harder for millions of Americans and business owners. Back in November of 2021, the IRS laid out its yearly inflation adjustments for 2022. Here are a few of the most important changes you should be aware of for small business tax planning:

• Standard Deductions: Amounts for standard deductions have gone up for every taxpayer. The standard deduction for heads of households has increased by $600 to $19,400. Amounts for married couples filing jointly have gone up as well, to $25,900. That’s an $800 increase. Those who are married but filing separately or who are single have a standard deduction of $12,950, which amounts to an increase of $400.
• Earned Income Tax Credit: If you have three or more qualifying children, your earned income tax credit has increased to $6,935.
• Medical Savings Account: If you’re covered with this plan, your annual deductible has increased by $50 from 2021 to $2,450. Maximum deductibles are now $3,700, which is up $100 from last year.

Consider These 4 Tax Tips

When it comes to managing finances, small business owners have a long list of day-to-day responsibilities. If you’re like most people, calculating and managing your small business taxes is low on that list. We get it – tax prep and planning is a complicated, tedious experience. To maximize your finances and make the process less stressful, consider these tips and practices when calculating your year-end taxes:

1. Don’t Forget Credits and Deductions

Depending on the nature of their work, many small business owners and self-employed workers are entitled to tax credits and deductions. Unfortunately, these deductions and credits are often overlooked due to inexperience or rushed tax prep. Make sure you’re aware of what credits or deductions you may be eligible to receive, like office expenses and travel expenses.

2. Be Wary of Tax Scams

Scammers are always looking for ways to trick hardworking people out of money, and that’s especially true during tax season. Sometimes, scammers will claim to be associated with the IRS’ Taxpayer Advocate program, offering financial assistance to business owners. Criminals are also known to target taxpayers who typically receive a refund on their taxes, often claiming the IRS recalculated their refund. As a general rule, remember – if it sounds too good to be true, it probably is.

Integrated Tax Pro Tip: Do yourself a favor and read up on the IRS’s “Dirty Dozen” tax scams. Compiled every year, this list goes into detail about recent tax scams, ways to avoid them, and what to do if you’re a victim of a scam.

3. Check for Uncollectible Debts or Old Inventory

Running a business means dealing with a certain amount of risk. Sometimes, the items you purchase don’t sell. Other times, certain debts aren’t collected. Neither scenario is ideal for an entrepreneur, but both are deductible. If you have a room full of inventory that didn’t sell, get rid of the items and deduct what you initially paid for them. The same concept can be applied to uncollectible debt, though what constitutes such a debt depends on the type of business you’re running. In both instances, you’ll need the proper records for proof.

4. Work with a Small Business Tax Professional

Tax laws in America are very nuanced and complex. Failing to file payroll or income taxes as an individual is never good. But as a small business owner, it gets worse. Falling behind on your business taxes can result in wage garnishment and tax liens. Hiring a tax expert to help during tax season reduces stress, can save you money, and in worst-case scenarios, save your business. Since they have your best interest at heart, they’ll also provide strategic planning so you’re not caught off-guard next year.  

Personalized Tax Prep and Guidance for Small Business

Integrated Accounting & Tax, LLC is a woman-owned accounting firm with services tailored to each client’s unique needs and goals. We guarantee that every service we provide is essential and propels your goal – even if you’re just starting out as a business owner.

Contact us today for a free tax services consultation. We have locations in Prior Lake, MN, and Ft. Lauderdale, FL, and can provide service to surrounding areas.