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2022-11 Your End-of-the-Year Checklist for Small Business Owners

Your End-of-the-Year Checklist for Small Business Owners

By Wealth Management Solutions

As the end of the year approaches, it’s time to take stock and organize this year’s finances so next year gets off to a smooth start. Our advisors provide thoughtful fiduciary advice for the care, guidance, and course corrections to manage wealth, plans, and goals with purpose for your business. Going through this checklist will help you minimize your tax burden and start 2023 off right.

1. Review IRS Elections 

If you had a net operating loss (NOL) this year, double-check your IRS elections to ensure you made the correct ones. This is one of the biggest issues our CPAs see when they help small business owners file their taxes. 

All these decisions play a role in how much money your business may owe in taxes. Talk with a CPA or financial professional about which elections may be right for you.  

Additionally, how you structure your small business can make all the difference in the world when it comes to taxes. A tax professional can help you decide which entity type is the best for your business and help you apply before the deadline hits. 

2. Review Deductions

The CARES Act brought about major tax incentives to people who donate to charity in 2020 and 2021, but the provisions of this Act have not been extended to 2022. This means you can no longer write off up to $300 in cash donations from your tax return if you take the standard deduction. And itemized charitable deductions are once again capped at 60% of your adjusted gross income for cash donations made. If you were planning to take charitable deductions in 2022, be sure to review them carefully to make sure they meet new requirements.

There are still deductions available for basic business expenses and these can help reduce your taxable income significantly. Some common examples of business expenses include:

  • Advertising
  • Legal and professional fees
  • Office expenses, including costs related to the business use of your home
  • Business use of your vehicle
  • Continuing professional education
  • Memberships to professional organizations 

Tax-deductible business expenses need to be ordinary and necessary to operate your business. Consult your tax professional for more details on qualified business expenses. 

3. Review Depreciation 

New depreciation rules have come into effect in recent years due to the Tax Cuts and Jobs Act (TCJA). These changes allow you to write off most depreciable assets “in the year they’re placed into service,” according to the IRS. 

Common items you can write off for depreciation include computers, equipment, machinery, cell phones, buildings, office furniture, and vehicles, as well as intangible items like copyrights.

Make sure you keep a list of everything that counts as a depreciable expense. Doing so will help you lower your business’s taxable income.

4. Check Eligibility for Company Retirement Plans

There are several different tax-advantaged retirement plans available to small business owners, including the solo 401(k), the SEP IRA, and the SIMPLE IRA. A solo 401(k) is designed for business forms with only one employee, the business owner, whereas SEPs and SIMPLEs can be used for businesses with more employees, though SIMPLE IRAs are capped at 100 employees.

According to the IRS, an employee can participate in a SEP IRA if they:

  • Are at least 21
  • Have worked for the employer in at least 3 of the last 5 years
  • Received at least $650 in 2022

Business owners can choose to be less restrictive than this and allow other employees to participate in a SEP, but you can’t be more restrictive than these IRS rules allow. Review your SEP IRA eligibility requirements to ensure employees can participate in the program if you want them to. 

5. Review Due Dates & Filing Methods for 1099s

Starting in 2020, any freelancers or contract workers who earned more than $600 from your company will receive Form 1099-NEC instead of 1099-MISC. NEC stands for “non-employment compensation”—and it’s only used for reporting independent contractor income. 

1099-NEC forms are due on January 31. If this day falls on a weekend, they’re due the following business day.

Our Planning; Your Future

Life gets busy and complicated at times, and it’s easy to lose sight of why you do what you do. At Wealth Management Solutions, we identify and integrate asset management and proactive thoughtful planning ahead of tax events. If you’d like to learn more about our process, reach out to us at (949) 475-9700 to schedule an appointment today.

About Wealth Management Solutions

The story of origin: Wealth Management Solutions was created in 2003, following the personal family tragedies felt by both partners of the firm. First, Richard Riva, the founding partner, lost his father unexpectedly and before any legacy planning was done that could have extended his family’s legacy beyond the fourth generation. Secondly, Martin Lombrano lost his father before plans and strategies were designed to protect his family’s wealth and legacy. Our partners and team members all share similar experiences due to a lack of planning for their families and are committed to our clients not experiencing the loss of their legacies due to a lack of planning. This is why we say: Our Planning; Your Future. 

All investing involves risk, including loss of principal. No strategy assures success or protects against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific investment advice or recommendations for any individual.

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