Navigating Small Business Taxes in 2023: A Comprehensive Guide

Posted on Febraury 6th, 2024.

In the ever-evolving landscape of small business ownership, staying abreast of tax regulations is crucial for financial stability and compliance. As we delve into 2023, understanding the nuances of small business taxes becomes paramount for entrepreneurs. Let's explore key insights and strategies to ensure your business thrives in the fiscal realm.

Understanding Tax Brackets and Regulations

Navigating through the maze of tax brackets can be daunting, but it's essential for small business owners to grasp these concepts. In 2023, the tax brackets have undergone adjustments, impacting businesses' bottom lines. Consulting reputable resources like the Internal Revenue Service (IRS) or trusted financial advisors can shed light on the latest updates tailored to your business needs.

Maximizing Deductions and Credits

Small businesses often have access to various deductions and credits, providing opportunities to lower taxable income. From operational expenses to employee benefits, identifying eligible deductions can significantly alleviate tax burdens. In 2023, staying informed about new deductions and credits introduced by tax legislation can optimize your tax strategy and improve cash flow.

Compliance and Regulatory Requirements

Maintaining compliance with tax regulations is non-negotiable for small businesses. Failure to adhere to tax laws can result in penalties and legal ramifications, jeopardizing the financial health of your enterprise. It's imperative to stay vigilant, keeping meticulous records and fulfilling tax obligations promptly. Leveraging professional legal and accounting services can offer peace of mind, ensuring your business operates within the bounds of the law.

Business Owners Can Expect Changes to Deductions

Business Meals Only 50% Deductible

During the pandemic, for the calendar years of 2021 and 2022, business owners were temporarily allowed to deduct 100% of the cost of work-related meals and beverages at restaurants. That provision has lapsed. For the 2023 tax year, deductions for business-related meals and beverages from restaurants are back at 2020 levels—that is, they’re limited to 50% of the cost.

Higher Standard Mileage Rates

Small business owners can claim standard mileage rates for business-related transportation. If you use your car for business purposes, you can deduct 65.5 cents per mile driven during the 2023 tax year. The amount is up 3 cents from the 2022 midyear rate.

Changes in Bonus Depreciation

Business owners may be surprised when claiming bonus depreciation, an additional first-year depreciation deduction. Bonus depreciation, implemented by the Tax Cuts and Jobs Act (TCJA) in 2017, allows business owners to write off a large percentage of the cost of a qualified asset.

TCJA allowed business owners to write off 100% of the costs of qualified assets that were placed in service between September 27, 2017, and January 1, 2023. However, for property placed in service in 2023, the percentage of bonus depreciation will decrease by 20% each year, as follows:

• 2023: 80%
• 2024: 60%
• 2025: 40%
• 2026: 20%
• 2027: 0%

Bottom Line

The 2024 tax season has introduced many significant tax changes, whether you are filing a personal or business tax return—or both. Understanding the tax changes will help you take advantage of opportunities to pay less to the IRS this year.

Small Business Estimated Tax Deadlines

Everyone who makes money independently, from a business to a freelancer, needs to file estimated income taxes. These are commonly known as “quarterlies,” because you file them roughly every quarter.

The IRS requires this for several reasons. The main reason is to smooth out the agency’s income. Instead of collecting its money once per year, estimeted taxes ensure that it has money coming in on a regular basis. Quarterly payments also make it more likely that any given business or individual will have money on hand. Many small businesses fail to properly set aside their tax money, so the IRS would have trouble collecting if it waited for a full year’s taxes all at once.

Quarterly tax payments are the estimated amount of income tax that you owe based on your income since your last estimated payment (typically the past three months). You can either make a complete calculation of all income, deductions and expenses to determine your correct current tax bracket or you can apply your past year’s tax bracket to the past quarter’s income; this is why it is called an “estimated” tax payment because the IRS allows back-of-the-envelope calculations.

In 2024, you must file quarterly taxes on the following dates:

• First Quarter, January – March: Due April 15, 2024
• Second Quarter, April – May: Due June 17, 2024
• Third Quarter, June – August: Due Sept. 16, 2024
• Fourth Quarter, September – December: Due Jan. 15, 2025                                     

Small Business Tax Deadlines

Just like individuals, businesses must also file their income taxes each year. The deadlines for when you must file these taxes differ based on the nature of your business, but these are the deadlines by which you must either file your taxes or file for an extension:

• Partnerships, LLCs and S Corporations Using A Calendar Year: Due March 15, 2024
• C Corporations and Sole Proprietors Using A Calendar Year: Due April 15, 2024

The IRS has scheduled Tax Day for Monday, April 15, 2024.

Note that these deadlines do not apply to corporations using a fiscal year system. If you use fiscal year accounting, then you must file your taxes by the 15th of the fourth month after the close of your fiscal year, adjusted for any holidays or weekends.

And remember, when it comes to IRS filing deadlines two rules usually apply: First, if you submit electronically then it is considered on time as long as you get your forms in by midnight of your local time zone on the day it’s due. Second, if you submit your forms in hard copy then they are considered on time as long as they are postmarked by the due date.

Small Business Tax Form Deadlines

Running any business requires relatively frequent contact with the IRS, as you manage to report for both your and your employees’ money. We will not go into the complete list of monthly payroll tax filings, for that level of granularity sees the IRS’ complete tax calendar. However, the important unique deadlines you need to know are:

• Employees Must Receive W-2 Forms: Jan. 31, 2024
• Independent Contractors Must Receive 1099 Forms: Jan. 31, 2024
• Switch Business Election to S-Corporation for 2024 Taxes: March 15, 2024
• File Business Taxes After An Extension, Partnerships, LLCs and S Corporations Using A Calendar Year: Sept. 15, 2024
• File Business Taxes After An Extension, C Corporations and Sole Proprietors Using A Calendar Year: Oct. 15, 2024

There are a few critical things to remember. First, the deadline for employees and contractors to receive their tax paperwork is different than most other IRS deadlines. In that case, Jan. 31 is the date by which they must have the documents in hand, either electronically or in hard copy.

Second, while a tax extension gives you six extra months to file your paperwork, you still must make an estimated tax payment in March or April (depending on the nature of your company). If your estimated payment is significantly less than the taxes that you end up owing, the IRS will charge you an underpayment penalty.

Small Business Payroll Tax Deadlines

Every organization with employees must also handle paytoll tax filing and payments. You are required to pay your employees’ payroll taxes and income tax withholding regularly, typically on either a monthly or biweekly basis depending on the nature of your business.

In addition to making these payments, you must also regularly file a payroll tax form with the IRS. While some very small businesses can do this by filing Form 944 with their annual returns, most businesses will handle payroll tax filings by filing Form 941 every quarter. If this paperwork shows any additional taxes owed beyond the deposits you have already made, those payments will be due one month after you file.

Those deadlines are:

• First Quarter, January – March: Filing Due March 31, 2024; Payment Due April 30, 2024
• Second Quarter, April – June: Filing Due June 30, 2024; Payment Due July 31, 2024
• Third Quarter, July – September: Filing Due Sept. 30, 2024; Payment Due October 31, 2024
• Fourth Quarter, October – December: Filing Due Dec. 31, 2024; Payment Due Jan. 31, 2025

Bottom Line

Running a small business involves frequent contact with the IRS. From payroll taxes to estimated quarterlies, the tax deadlines for your small business are important to keep up with so that you don’t end up incurring penalties or fees. In fact, you could even be forced to disband your legal entity for your business if you don’t meet certain deadlines. It may be best to hire a professional to manage all of these deadlines for you if it’s too much to focus on.

Tips for Tax Planning

• Good financial advice isn’t just for individuals. Financial advisors can also help you if you have a business and need better tax planning or management. Finding a financial advisor doesn’t have to be hard.
• Small businesses have their own set of credits, deductions, expenses and more. Make sure that you claim everything you are entitled to claim, so you can keep those taxes as low as possible.

Strategic Tax Planning

Proactive tax planning is the cornerstone of financial success for small businesses. Crafting a comprehensive tax strategy tailored to your business goals can mitigate tax liabilities and enhance profitability. Engage in year-round tax planning discussions with your advisors to capitalize on available opportunities and minimize tax burdens effectively.

The Importance of Legal Guidance

In the complex landscape of small business taxes, seeking legal counsel is indispensable. A knowledgeable attorney can provide invaluable insights, guiding you through tax implications and regulatory requirements specific to your industry. Whether it's entity formation, contract review, or tax dispute resolution, having a trusted legal partner can safeguard your business's interests and foster long-term growth.

Finally, when in doubt, you can always check with the IRS and obatin updated information: Things to remember when filing 2023 tax returns .

Contact Us for Expert Legal Advice

At Ronald J. Fichera Law Firm, we specialize in providing comprehensive legal and business services tailored to startups and small businesses. With a deep understanding of tax law and regulatory compliance, our team is committed to helping entrepreneurs navigate the complexities of small business taxes in 2023 and beyond.

For personalized legal guidance and strategic tax planning, contact us today:

Phone: (610) 768-9255

Email: [email protected] 

Ronald J. Fichera Law Firm

In conclusion, staying abreast of small business taxes in 2023 is essential for financial success and regulatory compliance. By understanding tax brackets, maximizing deductions, and prioritizing strategic tax planning, entrepreneurs can optimize their tax strategies and propel their businesses forward. For expert legal advice and support, Ronald J. Fichera Law Firm is here to assist you every step of the way.

Content in this material is for general information only and is not intended to provide specific tax or legal advice or recommendations for any individual.