Tax changes for small businesses for tax year 2023

On Behalf of | Apr 17, 2024 | Business Law, Tax Issues

Paying taxes in the state of Pennsylvania can sometimes be quite complicated. Adding to the complexity this year for many Pennsylvanians is the fact that the tax law is changing. This is especially the case for businesses. Not being aware of these changes could hurt you in terms of your return. You may even end up violating the law. Always make sure you are in complete compliance with the tax code when preparing your return.

Changes in the tax code and enforcement

There have been a number of changes to the tax code and enforcement by the IRS that are very relevant for business owners in regards to tax planning. A list of just some of these include:

  • tax advantages for retirement plans
  • the capitalizing of research and development expenses
  • an increase in the underpayment penalty
  • harsh enforcement of the employee retention credit by the IRS
  • a decrease in the bonus depreciation allowance

The Secure Act 2.0

One of these changes was brought about by the passage of a new law in 2022 called the Secure Act 2.0. This law gives new tax advantages to businesses that offer a retirement plan. This includes a new tax credit that can cover 100 percent of the startup costs associated with creating new 401k plans for employees. The credit is capped at $5,000. Still, if you are looking to offer benefits to your employees, this can be a great way to help retain top talent while also lowering your tax burden for 2023.

Employee retention credits

How the IRS is enforcing the law has also changed this tax year. One thing you may want to avoid is the employee retention credits that were introduced during COVID as a means of helping small businesses. The program quickly gained a reputation for fraud, and the IRS has been viciously clawing back funds from small businesses that misused these credits to the tune of millions of dollars. As such, avoiding these credits entirely may be the best option moving forward.

The tax landscape changes from year to year. As such, it’s important to stay updated on these changes as a small business owner. Don’t be afraid to file for an extension if you need more time to make the appropriate adjustments.

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