Sovereign Tax Solutions

5 Tax Deduction Tips for Small Business Owners

It's tax deduction season time! Now is the time to consider making business or personal purchases that can help reduce your 2022 tax bill. I'm going to share an example with you on how you can possibly save $1000 on certain purchases, as well as give you 5 year-end tax tips.

If you want to reduce your taxable income, you need to take steps to do this before the end of the year. One of the best things you can do if you're looking to fund and grow your business in 2023 is purchase items that can be an essential part of your business in 2023.

For example, let's say your taxable income for 2022 is $50,000, and you purchase a product for $3,000; you would reduce your taxable income by $3,000.00, which means that instead of being taxed on the full $50,000, you'll only be taxed on $47,000 of income given a 30% tax rate which means that you could possibly save $1,000 in owed taxes! Outside this example, you will also find below 5 additional tips on how to save money before the end of the year.

Tip #1: Stock up on prepaid expenses: If you need supplies or inventory for your business and you have extra cash sitting around consider prepaying for these expenses to reduce your tax burden.

Tip #2: Try switching to an annual plan for any subscriptions: If you have a subscription service or membership, you'll want to consider switching to an annual option instead of a monthly or quarterly.

Tip #3: Write off bad business debt: Bad debt can be written off before the end of the year and then deducted from your taxable income. Run your accounts receivable aging reports to see which receivables are unpaid from customers and write that off.

Tip #4: Write off or write down equipment and inventory: Review your business inventory and equipment. Obsolete damage or worthless equipment can be written off.

Tip #5: Give employees bonuses or gifts: In addition to receiving a potential tax deduction for paying bonuses or gifts to employees, you may also receive goodwill from them, especially around the holidays. (For gifts I would highly recommend limiting each gift to $25.00 per employee). Happy saving!

📌The PATH ACT has been lifted. This means that for anyone who claimed Earned Income Tax Credit and/or Additional Child Tax Credit, your refunds will begin to process.

Here’s what you need to know….🤔

❗ Taxpayers affected will not see an update to their tax refund status for several days after February 15, 2022.
👉The "Where's My Refund" (WMR) is projected to update the deposit date for some early EITC/ACTC refund filers by February 19, 2022.
👉 The first batch of PATH HELD Refunds will have direct deposit dates of February 23, 2022.
👉Where's My Refund will update the second batch of deposits dated for early EITC/ACTC filers by February 26, 2022.
👉The second batch of PATH HELD Refunds will have direct deposit dates of March 2, 2022.

Below you will find the timeline:

March 15th - PATH ACT lifts. EITC/ACTC refunds start to process.
March 16th -Daily Transcript update.
March 17th - Daily Transcript update. WMR Update from 2/16.
March 18th Daily Transcript Update. WMR Update from 2/17.
March 19th - Daily Transcript Update. WMR Updates for 2/23.

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