The Internal Revenue Service (IRS) has officially started accepting and processing 2023 tax returns. For business owners, staying informed about the latest tax updates is crucial to ensuring you're following the rules while also minimizing your tax liability.
Here are three key updates for the 2023 tax season that may impact your business:
Business Meals Deduction Update
After a temporary allowance of a 100% deduction in 2021 and 2022 due to the pandemic, the deduction has now reverted back to 50%. This means that as a business you can only deduct half of your expenses related to business-related meals.
While the reduction may seem like a setback, It's important to note that this change is simply a shift back to the amount that was allowable pre-COVID. So in addition to ensuring that is reflected in your 2023 filing, make sure as you plan your budget and expenses for 2023 that you factor this into your financial projections.
Increased Standard Mileage Rates
Businesses who regularly incur travel related expenses will be pleased that the standard mileage rates have increased for 2023. The new rate is set at 65.5 cents per mile for business-related travel, marking a 3-cent increase from the 2022 mid-year rate.
This adjustment aims to account for the rising costs associated with transportation and reflects the evolving economic landscape. Make sure you take advantage of this higher rate when calculating your business-related travel expenses to maximize your deductions.
Remote Work Considerations
The surge in remote work continues to reshape the way businesses operate. If you have employees that work in different states, it's crucial to be aware of the tax implications associated with remote workers. State tax laws and withholding requirements can vary significantly, so it's important to review the tax requirements in each state where you have employees to ensure you're compliant.
This includes staying abreast of any changes in state tax laws throughout the year and adjusting your withholding practices accordingly. Failing to do so could result in penalties and complications when you go to file.
Getting up-to-date with these changes and seeking help from an expert can help you stay on track, avoiding issues with the IRS. Make sure you take these changes into account, use any deductions you're eligible for, and find an accounting expert to guide you through the tax process with confidence.
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