The Internal Revenue Service (IRS) is asking small business owners to familiarize themselves with new benefits and reporting rules ahead of the next tax season.
The revisions to the nation’s tax code, originating from the Biden Administration’s Inflation Reduction Act (IRA), have expanded cost-cutting options for small businesses and made important benefits programs more accessible to employers. As part of its participation in the nation’s annual Small Business Week, the IRS compiled a list of updates for business owners to research before they file for 2023.
New tax breaks include:
1: the Clean Commercial Vehicle Credit, giving companies that purchase zero-emission vehicles for their work up to 30% back on their purchase
2: credits for using solar to power business operations, covering 30% of installation expenses, and
3: credits for the use of energy-efficient technology in buildings, which offer $5 per square foot.
Business owners can also posthumously claim The Employee Retention Credit (ERC), which ended after 2021, by submitting an amended federal payroll tax return. However, the IRS is urging companies to exercise caution when searching for tax assistance due to a high number of ERC-related scams.
The government has also changed the rules surrounding educational assistance programs. Companies can now pay up to $5,250 for their staff member’s student loans. Financial assistance over this amount can still be provided but will be taxed as wages. Although these benefits are only available for the next two years, ending December 2025, the IRS is asking business owners to consider opening a program, as they “can help employers attract and retain good workers.”
While the IRS has not revised any income tax rules, it will require more companies to submit a Form 1099-K. Starting this tax year, businesses that are paid over $600 from third-party settlement organizations or which receive income through payments apps like Venmo or Paypal will now need to submit these documents with their returns. The forms, typically used to cover business transactions, cover a variety of non-wage earnings, such as those from asset sales and self-employed work. Most can expect to receive these documents in January 2024.
While it is important for small business owners to stay updated on tax regulations and benefits, it is arguably even more critical to keep accurate financial records. To learn more about the government’s latest tax policies, visit the IRS’s small business week page here.