Small businesses need to consider these actions now to cut 2022 taxes

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Did you, like me, complain about the amount of taxes you had to pay last year? Now is the time to do something about it, at least for 2022.

March 15 was the deadline for small businesses that filed “pass-through” returns and next week (April 18) is the tax deadline for individuals and corporations, which means – unless you haven’t extended your returns until October – your 2021 tax year is quite a lot longer. But instead of getting rid of taxes—the federal, state, and city government can eat up 20-40% of your income—we should all think about the future. Because the more we can plan for 2022, the less tax we will have to pay.

So here are some steps small business owners can take now to save on taxes this year.

For most accountants, peak season is almost over. That’s why you should set an appointment to meet in May. Why? Because at that time, the year is almost over and there is still plenty of time to plan your tax measures. Additionally, by sharing with your accountant how your business has performed this year and your projections for the rest of the year, better tax estimates can be made, which should help avoid surprises.

READ MORE: Need your 2021 Philadelphia City Payroll Tax Refund? Here’s how to get your money.

Like most small businesses, you probably make estimated quarterly payments. Don’t ignore them. But more importantly, consider adjusting them based on how the year has gone and your ongoing conversations with your accountant.

This credit can provide a huge tax savings for your business this year – and through 2025. The credit – which can be up to $9,600 and offsets the amount of taxes you owe – may be available if you hire someone out of prison, out of welfare, leaving the military, or unemployed for more than six months. Talk to your accountant before you hire this person to see if this new employee qualifies and how much credit can be earned and perhaps share some of those tax savings with the employee in the form of a bonus. hiring.

This year, most small businesses can deduct up to $1,080,000 when buying capital goods — including machinery, furniture, and most tech products. Investing in capital goods is a great way to hedge against inflation. What’s even more interesting is that you can finance the equipment now while interest rates are still relatively low and, as long as you put the asset into service by the end of the year, you realize the full deduction this year.

If you don’t have a 401(K) plan in your business, create one. The Secure Act of 2019 provides tax credits for companies with fewer than 100 employees. If you have a 401(K) plan, try to save the maximum amount. Most taxpayers this year can save up to $20,500 individually and up to $61,000 if a business matches. Most important: Encourage your employees to participate, because the more they save, the more you can save without failing the government’s year-end discrimination tests. If you don’t have a 401(K) plan, you can set up a Simplified Employee Retirement Plan (SEP) and potentially contribute additional amounts to an IRA.

If you save money in a Roth IRA or 529 plan, your income has already been taxed, but future income and gains from those investments will not. A Roth IRA is limited to certain income levels, but if eligible, after-tax amounts can be saved and all future withdrawals are tax-free. A 529 plan will save you money for yourself or other family members that will grow tax-free as long as it is used for higher education or a private or religious school during withdrawal.

Until 2025, you are allowed to deduct up to $5,250 per employee when you help pay their student loans. You can also deduct up to $5,250 if you reimburse them for other educational expenses. There are generous tax credits for employers who build child care facilities and, separately, an employer can exclude from an employee’s income (up to a limit) certain qualifying child care expenses. (and saving the employer’s taxes himself). The IRS also allows you to deduct up to $14,890 to help employees with adoption expenses. All of these amounts would not be taxable to your employees.

If you have a high-deductible health insurance plan, be sure to set up health savings accounts for yourself and your employees so you can all save pre-tax money and use those funds for non-medical expenses. reimbursed such as acupuncture, vision treatments and infertility. Or, if you’re eligible, consider setting up health reimbursement accounts to set aside pre-tax money for employees to purchase health insurance on their own.

Nobody likes paying taxes. But with a few proactive steps, your company’s tax liability can be reduced…and you may be able to leverage the government to help provide better employee benefits, too. All it takes is making your plans now, rather than waiting until the end of the year.

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