Key Takeaways from Keiter’s 2023 Business Tax Update

By Keiter CPAs

Key Takeaways from Keiter’s 2023 Business Tax Update

Insights on this year’s tax regulation changes

At this year’s Fall Seminar event, Keiter Opportunity Advisors shared their insight on the latest updates to accounting regulations. Tax Partners Vince Nadder, CPA and Ryan Beethoven-Wilson, CPA provided attendees with important tax considerations to keep in mind when working with business owners. Here are six key takeaways from their business tax seminar:

1. Corporate Transparency Act

Introduced in January 2021, the Corporate Transparency Act (CTA) is part of the National Defense Authorization Act. The CTA represents an anti-money laundering initiative by requiring entities with the potential to be considered anonymous shell companies to report information regarding beneficial ownership. FinCEN is developing a database to store all information received from reporting entities. FinCEN can only release the data for law enforcement, national security, or intelligence purposes.

There may be substantial penalties of up to $10,000 for noncompliance. Should the CTA, after several legal challenges, survive in its current form, coordinating with legal and/or accounting advisors will be important for business owners.

2. Employee Retention Tax Credits

The Employee Retention Tax Credit (ERC) was a lifeline for many during the pandemic, aiding employers affected by COVID-19. The ERC is a refundable employment tax credit for employers paying qualified wages and health plan expenses who experienced a full or partial suspension of operations due to a government order or a significant decline in gross receipts.. However, due to cases of fraud and overstated claims, the Internal Revenue Service (IRS) has put a temporary halt on new ERC claims processing since September 2023. If you’ve filed an ERC claim, consider reviewing it for accuracy to avoid future complications and beware of tax mills and newly-formed promoters pushing employers to make ERC claims without performing substantial due diligence.

3. Research and Development Expenses

In 2022, the tax treatment for research and development (R&D) expenses began to change. These expenses must now be capitalized and amortized over time. While there’s bipartisan support to reverse this and allow full deductibility again, no legislative changes have been made yet. Tax professionals are keeping a close eye on this for any developments that may benefit your business.

4. Bonus Depreciation

The 100% bonus depreciation, a significant tax relief that was allowable on qualified property placed in service between 2017 and 2022, is phasing out. Starting in 2023, this benefit gradually reduces, coming to an end by 2027. This change impacts how you plan for large equipment or property investments.

For the 2023 tax year, the maximum available Section 179 expensing on qualified property is $1,160,000. It is important to understand that states may have different rules regarding this and bonus depreciation. Virginia has historically allowed Section 179 expensing, but de-conformed from bonus depreciation.

5. S-Corporation Relief

The IRS has offered relief for specific invalid or accidentally terminated S-corporation elections. This is an important consideration if your business is structured as an S-corporation. A few common issues that are addressed by this relief include:

  • Agreements that create more than one class of stock (i.e., LLC’s with S-elections, but for which operating agreements continue to have disqualifying language).
  • Disproportionate distributions.
  • Clerical errors on Form 2553 or Form 8869.
  • Missing administrative acceptance letter.
  • Income tax return inconsistent with S or QSub Election.

6. Tax Cuts and Jobs Act (TCJA) Sunset Provisions

Post-2025, several TCJA provisions, like individual tax rates and business loss limitations, will expire. Businesses should start planning for these changes now. A few TCJA provisions that are expected to be permanent include:

  • Flat C-corporation tax rate of 21%.
  • Elimination of C-corporation Alternative Minimum Tax.
  • Net operating losses are only eligible for carryforward, and subject to an annual 80% usage limitation.
  • Section 1031 like-kind exchanges are only available to business or investment real estate (personal property, vehicles, etc. are not eligible).
  • Increased thresholds for various accounting methods (cash-basis, inventories, uniform capitalization), starting at $25M gross receipts in 2018 and indexed for inflation.
  • Entertainment expenses 100% nondeductible.

Keiter tax professionals stay current with business tax changes and can help you navigate these changes with ease and confidence. Visit our site for more tax insights and contact Your Opportunity Advisor for more detailed advice tailored to your specific business needs.

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Keiter CPAs

Keiter CPAs

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


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