Tax and Accounting Strategies for 2023

As January approaches, ways to ensure financial stability in the new year are a must-have. Not only does this mean investing in best business practices, but keeping up with laws and tax codes that could effect your company’s liability. These accounting and tax planning tips will help your business get off to a strong start in 2023.

Stay current on tax code updates

With much of the Inflation Reduction Act of 2022 going into effect on January 1, 2023, there are several important new guidelines to consider. Consult with your tax professional to make sure your business’s tax planning is up to date with these amendments.

For C corporations making more than $1 billion annually in pre-tax income, a 15% minimum “book tax”

Large enterprises already incorporated or considering incorporation should note this adjustment. C corporations with annual profits over $1 billion pre-tax will owe the greater of either a 21% tax on their adjusted gross income, or a 15% tax on their adjusted financial statement income (typically made up of their “book income,” if using generally accepted accounting principles).

Expanded renewable energy credits

As motivation for clean energy investments, expanded tax credits will be issued for renewable energy projects:

• Amended section 45Q, providing carbon capture credits for certain projects beginning construction before 2033
• Extended energy investment credits for certain projects involving energy storage, microgrid controllers, biogas, solar, and wind projects
• Section 45Y, a new credit for clean electricity production
• Section 45X, a new credit for advanced manufacturing production, meant to encourage domestic sale of integrated components for projects involving solar, wind, energy storage, and critical minerals.

A 1% excise tax on corporate stock buybacks

For any stock of a “covered corporation” repurchased by that same corporation during the tax year, there will be a 1% excise tax on the stock’s fair market value. “Covered corporations” refers to publicly-traded domestic corporations only.

An increased IRS budget

With the act, the IRS receives an $80 billion budget to put toward updating technology, improving customer service, and employing more auditors. An increase in audit activity should definitely be expected.

Stay covered with tax planning best practices

With updates to tax codes and the IRS’s enforcement capabilities, it’s important to stay on top of your taxes. Don’t just prepare for the tax season at hand. Set a good foundation for years to come by establishing best practices.

• While gathering this year’s documents, think about what you’re missing. Make a list of things to do differently or ways to stay organized.
• Open a separate business checking account and set aside each month’s taxes until it’s time to pay.
• If budgeting is difficult, consider monthly tax payments, rather than stockpiling funds throughout the year.

Stay secure with evergreen financial advice

Keeping on top of tax planning is just one piece of your business’s financial puzzle. Combine your tax prep with these best accounting practices for solid footing in 2023.

Keep good records

Well-organized documentation provides a clear picture of your finances, so you can make the best business decisions. Closely monitor your business credit, and review your books monthly at least. Regularly update financial documents like your profit and loss statement.

Always be prepared

Keep a safety net in the bank for when disaster strikes, and make sure you’re stable with the resources you already have at your disposal. If your business plan includes an annual profit influx, set a contingency plan in case there’s an unexpected disruption to the cash flow. Think through worst-case scenarios involving your finances or staff and plan solutions.

Set yourself up for success

Your company needs a stable foundation, but to build upon that foundation, you have to spend money. Rather than wishing you had the funds for an expansion, invest in your business by budgeting for long-term growth. If opportunity strikes, apply for loans when needed, but be careful not to overextend.

Stay prepared for 2023 with accounting and tax planning tips

These financial tips will point your business in the right direction, but working with experts to develop a customized tax and accounting plan is your roadmap to success. The professionals at SME CPAs don’t just report tax updates, they help you understand how those updates apply to your business, guiding your entire tax preparation process with years of experience. And with specialization in a variety of business-types, their accounting assistance is tailor-made for your industry. Working with SME CPAs ensures these financial practices go from nice suggestions to well-established habits in 2023.