While tax season is a time of celebration for many Americans eagerly awaiting their tax returns, it can be a time of stress for many business owners.
The 2023 tax season presents unique situations of which business owners need to be aware this time around. By staying abreast of these new developments while keeping a bit of age-old wisdom in mind, you can make it through tax season without a hitch.
1. Be aware of the January tax bill for 2020 deferments
Business owners who owe Social Security taxes deferred during 2020 must complete the remainder of their payments to the IRS by January 3, 2023.
2. Keep in mind new reporting requirements for 1099-K
If your business receives payments through a third-party processor such as Venmo or PayPal, you need to be aware of new reporting rules as of the 2023 tax season. If your business receives payments totaling $600 or more for the year, you must report that income with a form 1099-K.
3. Set aside sufficient cash
You might experience a small crisis if you find that you must pay for an unexpected tax liability and you do not have enough cash on hand to fulfill that obligation. Consider setting aside as much as 35% of your net income to cover these unforeseen expenses.
4. Always file a tax return on time
Be sure to file your tax return before the April deadline even if you cannot pay the bill upfront. Timely filing ensures you meet legal compliance, and you can initiate a payment plan to fulfill your obligations to the IRS.
Tax season can be a busy time for business owners, but you can handle the tasks at hand with preparedness and good organization.