Year-End Tax Matters Update: Part 2
Year-End Tax Matters Update: Part 2
Year-end legislation: At this point, there is no official pending legislation, but the hope is that an end-of-year omnibus or an early 2024 spending bill will address the following important tax breaks for small businesses:
Restore bonus depreciation to 100%
Increase the Sec. 179 expense limits
Restore the immediate expensing of R&D costs
Make permanent the small business income deduction for pass-throughs
Two-year increase in standard deduction by $4,000
Long-Term Capital Gains Favorable Rates: The favorable rates are still in effect for long–term capital gains, defined as those held for more than a year. The long-term gains rate for married couples is generally 0% at AGI under $89,250 and 15% at AGI under $553,850. The rate caps at 20% when AGI is over $553,850. These rates can be significantly lower than the standard individual income tax rates. Net gains on capital assets held less than a year are taxed at the individual normal rates.
Employee Retention Credit Withdrawal Process: An area that has been overrun with incorrect credit claims, oftentimes at no fault of the small business owner, the IRS has announced a new Employee Retention Credit claim withdrawal process for small business taxpayers who are concerned about the accuracy of an ERC claim.
The new process allows a small business to withdraw a credit claim to avoid receiving a refund for which they're ineligible. Withdrawn claims will be treated as if they were never filed. Further, the IRS will not impose penalties or interest.
Reminder #1: Be Aware of the Employee Health Care Reporting Threshold.
Many small businesses have less than 50 full-time employees. But be aware that if that threshold is exceeded, a business with 50 or more full-time-equivalent employees is required to file Form 1095-C with the IRS as well as to the employee. This form reports annual health insurance coverage info for each full-time employee. Failure to file this info comes with IRS penalties for non-filers and late-filers to the tune of $310 per employee for 2024 filings.
Reminder #2: New Information Returns Electronic Filing Requirements.
Very important. There are new mandated electronic filing requirements for 2023 information returns (filed in 2024) that are significantly different than 2022, emphasize on significantly. Under prior rules, electronic ?ling was required for an information return only when it exceeded a 250-return threshold. This was determined on a per-return-type basis. (i.e. Form(s)1099, W-2).
The new rule reduces the electronic filing threshold to only ten returns. Here’s what’s markedly different: returns of different types must now be aggregated to determine if the threshold of ten is met.
To assist with the electronic filing of Form 1099 series, the IRS developed a new online portal called the Info Returns Intake System (IRIS). This free electronic filing service requires no special software. Though available to any business of any size, IRIS may be especially helpful to small businesses that currently file Forms 1099 on paper to the IRS.
Returns affected by the electronic filing mandate include partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns for U.S. Source Income of Foreign Persons, information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns, among others.
In other words, this mandate basically requires most small businesses to electronically file all information returns.
