Business Tax Planning: Top Strategies for 2022 Returns

As we round out the end of 2022, there is no time to sleep on implementing key tax strategies to impact your business’s tax implications. Immediately acting on a proactive, year-end tax plan has the potential to make a big difference on your next return.

 

When evaluating your 2022 tax strategy to close out the year, refer to the following tax considerations.

  1. Debt Restructuring: With rising inflation and fluctuating interest rates in mind, many business owners restructured their debt over the last year… and potentially set off tax implications while doing so. If significant, debt modifications have the possibility to create cancellation of debt (COD) income. Consult a tax professional to evaluate whether your business’s 2022 interest deduction could be limited and assess other impacts to your return.
  2. Research & Experimentation (R&E) Amortization: For business owners in industries like manufacturing or tech, R&E may be a significant investment. Through a Tax Cuts and Jobs Act (TCJA) change effective for tax years beginning in 2022 and later, R&E costs must now be amortized over five years instead of being expensed. Significant efforts to mitigate the impact, such as determining whether certain costs remain deductible, may be beneficial.
  3. Reduce Adjusted Gross Income: Taking appropriate deductions against your income is critical to keeping your income in lower tax brackets. One strategy is to itemized deductions such as a mortgage deduction, property taxes, charitable donations and contributions to retirement accounts on your personal return.
  4. Implement Fringe Benefits for Employees: Consider tax-exempt fringe benefits such as medical insurance, group life insurance, assistance with childcare, transportation reimbursements, employee meals or even tuition reimbursement to help offset higher employment tax costs.
  5. Leverage Retirement Planning: The retirement plan you set up years ago may not be offering the largest pre-tax contributions at your current income level. A tax professional can help to assess which type of retirement plan – Traditional IRA, 401k, cash balance plan, or a combination – may be right for you and your return.
  6. Accountable Plans: You’re likely reimbursing your employees for some expenses, but are you also unintentionally reporting them as employee income? Be sure to use an accountable plan to reimburse travel and entertainment expenses appropriately.
  7. Business Entity: Sole Proprietor, S-Corp, LLC, Partnership? Is your business set up for tax efficiency? A tax professional can help evaluate what’s best for your tax strategy.
  8. Stay up to date: The only thing that’s constant is change… and your tax professionals at Lodovico & Associates are on top of all the latest tax news and laws to ensure your business will benefit.

Tax planning is a crucial part of owning a business, but you’re not alone. Are you ready to make or implement a year-end tax plan? Our tax advisors are ready to help.

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