Nevertheless, even if you take all these steps, it's still important to keep enough cash on hand for the next tax cycle, just in case there's another surprise.If you’ve been in business or you are just starting out, your sole focus is to succeed. Secure 2.0 encourages small business owners to create retirement savings plans through starter plan options and tax credits for both administrative costs in setting up a plan and making employee match contributions.
Thanks to recent passage of the SECURE 2.0 retirement savings legislation, there could be additional tax benefits for certain business owners who start tax-deferred retirement plans, so that's also worth investigating, Prinzo said. A client recently did this mid-year and eliminated the need for a $300,000 estimated tax payment, Carbonaro said. Small businesses could also consider setting up a tax-deferred retirement plan for 2023, which can help with tax savings, said Cary Carbonaro, a certified financial planner with Advisors Capital Management in Winter Garden, Fla. "The goal is to have your tax paid by the end of the year," Wilkinson said. Planning ahead with a CPA can help ensure owners aren't blind-sided in the future.įor instance, if an owner sees in the middle of the year he or she is making more money, estimates can be tweaked to minimize some of the impact at income tax time. Work with a CPA to plan ahead, and potentially defer taxes. "Life changes generally mean tax changes," Phillips said. Owners may not have taken into account new life circumstances that could qualify them for a tax benefit or benefits, such as marriage, having children, caregiving for certain individuals or education expenses. Small business owners may also be able to deduct home office expenses, if applicable.įor many small business owners, personal tax benefits can also reduce the taxes due.
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In addition, there may be additional opportunities to deduct expenses, such as software, advertising or certain professional service fees, Phillips said. "Make sure there haven't been any missed planning opportunities."įor example, there are favorable rules associated with taking accelerated depreciation, often referred to as bonus depreciation, which can help lower the tax burden. "Often business owners aren't taking advantage of all the things they're entitled to," Prinzo said. It behooves small businesses to take a second look at their tax return and consider filing an amended return if they are able to eke out additional deductions. But owners have to weigh credit costs against the penalties and interest they'll accrue from the IRS, according to Anne Zimmerman, president and founder of Zimmerman & Co CPAs and co-chair of Small Business for America's Future, a national coalition of small business owners and leaders. "Don't use the IRS as your banker," Zimmerman said. Interest rates may be high for some of these options - in many cases reaching into double-digits on a percentage basis after a year of Federal Reserve rate hikes. "It's incredibly important that small business owners never borrow from their payroll withholdings to pay anything else," Phillips said.Ĭonsider personal loans, credit even at higher interest rates.Ī small business owner who needs cash to pay his or her taxes might consider a bank or credit card loan or some other type of short-term financing, such as tapping an existing line of credit if available. That's not allowed and could result in a stiff penalty. Sometimes small business owners with employees try to tap money earmarked for payroll taxes to pay their personal taxes. Though future penalties may be reduced by setting up a payment plan, it's advisable to pay off the tax liability as soon as possible to limit the adverse effects of accruing interest. Owners should keep in mind the IRS's "Failure to Pay" penalty based on how long their overdue taxes remain unpaid. They can visit the relevant section of the IRS's website to see what's available, as well as potential costs and filing options. Owners who need more time to pay may qualify for a short-term or long-term payment plan. "It's a tremendous relief for those that are impacted," said Michael Prinzo, managing principal of tax with CliftonLarsonAllen in Greenwood Village, Colorado. To learn more, they can visit the section of the IRS's website specifically dedicated to this topic. "It's an extension to file, not an extension to pay," said Kimberly Wilkinson, senior tax manager at Wiss & Company.Ĭheck for local disaster exceptions to filing.Ĭertain taxpayers may be able to benefit from IRS extensions for filing last year's taxes and 2023 estimated taxes due to disaster situations in their local area.
Some business owners likely have sought an extension, thinking this will allow them to push off their payments without financial repercussions. Personal Loans for 670 Credit Score or Lower
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