IRS Updates & Compliance Deadlines

• Employee payroll reports are due Jan 31 

  • W2, W3, FUTA, SUI, etc. 

  • In 2024, businesses that file 10 or more W2s must e-file

  • A 30 day extension for W2 can be filed with form 8809 

• Contractor payment reports are due Jan 31 

  • 1099-NEC, 1099-MISC 

  • All contractors paid over $600 in 2023 must receive a 1099  

• Q4 2023 Estimated Tax Payments due Jan 15 

• Filing deadline for personal return is Apr 15; deadline for s-cops is Mar 15 

  • Those dates correspond with the last day to make certain retirement contributions for 2023 

    • S-corp employer side retirement contributions- Mar 15 

    • Self-employed/individual retirement accounts Apr 15 

    • Solo 401k ee contributions should be documented on W2

• BOI reporting on FINCEN is now a requirement of registered businesses starting in 2024. See my walkthrough here  

Since we're at year end, we're going to have a quick talk about retirement accounts as a way of tax savings. As a business owner, you likely have several options and even more combinations of the retirement accounts you utilize. What you choose will largely impact the amount you can contribute and deduct from your taxes. 

Everyone has a different take on if and how much they think is worth stashing away into retirement accounts, but JUST IN CASE the world doesn’t get destroyed by a meteor, I’d recommend trying to at least contribute enough to maximize free money and meaningful tax savings.

The first thing to square away is roth vs traditional.  

Roth- the contribution is after tax money—you pay taxes on the money, then put it in a retirement account where it grows tax free and is not taxed when pulled out in retirement. You don't get a tax deduction from contributing, but you can see that there is serious upside in retirement 

Traditional – the contribution is pre-tax money, and you (usually) get a tax deduction for making this contribution. Since this money is not taxed when it's put in, it is taxed when you pull it out in retirement. So you can see there is both upside (tax deduction) and downside (taxable at retirement) to this. 

IRAs- Most people have heard of IRAs. There are roth and traditional IRAs. There are income limits to contributing to a roth IRA, and there are deductibility limits to the traditional IRA if you are offered a retirement plan from your W2 job. These are the easiest to set up. 

401k- You can only utilize one 401k employee contribution limit of $22.5k no matter how many accounts it's spread over. You may have a 401k at a day job you can utilize, or you may want to create a self directed 401k from your business if you are self employed. 

Alternative self employed retirement accounts - Then you have different type of self employed retirement accounts- SIMPLE IRA, SEP IRA, Defined benefit plans, etc. Each have their own rules and scenarios of when it would make sense to utilize them. 

Some of these accounts have the option to choose either roth or traditional. I could write all day about different combos that make sense for different people, but I'm not going to. What you need to know is that you should either study these deeply, or get a tax advisor to help you create a plan for your retirement accounts. You are able to contribute to most of these plans for 2023 until tax day. 

Generally speaking, this could be an optimal guideline. IRA > 401k > SEP IRA > 

The choice of roth vs traditional should be dependent on the situation and examined with a tax for financial advisor.  

In the new year, a lot of people have goals of starting a business. I had a consultation with one of those people last week who was looking for info on doing it right. I'm glad he did reach out because he had some really good questions and some misconceptions that were confusing things for him.  

I think when we hear of stories of the ultra-wealthy people avoiding taxes, it influences what we think we need/should do to reduce taxes. We hear about offshore entities, trusts, different ownership structures, and some other really goofy ideas. I think this entrepreneur had a bit of that problem. Here are two things that he asked that show me that normal people starting a business really don't understand how business taxes work: 

Can I register the company in my mother's name to reduce taxes since she doesn't have income? 

I totally understand where this question came from, but it totally does not work that way. I asked, "who will be running the business? Who will be working in the business? Who does the business benefit?". None of the answers to those questions was the mother.  

It is very simple – if you are starting a business, and you are the one operating the business, you should be the 100% owner of it. There may be some partnership scenarios, but for the most part if you are the one generating the income and running the business, you should own it. To put the business and income in someone else's name for the purpose of saving taxes would be tax fraud. Tax savings happen with the business then on the personal side of the owner. 

Should I form my LLC in Delaware (I don't live or work there)? 

Again, I see where this question came from, but it just generally doesn't make sense for a small business. We always hear about companies incorporating in Delaware because of whatever structural/tax benefits it gives them. However, these benefits usually only help larger companies, so for a small business, it doesn't make sense to go through the hassle of filing as a foreign entity and all the additional legal fees and filings that come along with doing something like this. 

IMPORTANT – Where you earn your money is where it is taxable, not where your business is registered. 

For most people, when starting a business, you should be filing the business in the state where you live/work. If those states are different, you may need to register your business in your home state as well as a foreign qualification. To save the trouble, it's usually easiest and most sensible to register the business where you live and work. 

This was my first year in business at the turn of the year, and it's safe to say that it's the busiest I've been. It makes sense, business owners are generally putting off their tax & accounting and then realizing they are somewhat clueless around the end of the year. 

Upwork consultations are steady: 

I get a few random customers book a 30 minute (paid) consultations with me per week. These are great because it's generally proactive people who have a specific set of questions. Two things happen: I always answer whatever questions they have that made them book the call AND I always prospect whether they would be a good fit to be an ongoing or project based client for me and vice versa. 50% of the time, it’s a good fit and we talk—the other 50%, I happily answer their questions and send them on their way. 

I've signed 3 recurring clients so far in 2024: 

All 3 of these clients originated from Upwork. I put together a package that matched exactly what these small business owners needed for ongoing services. Recurring revenue helps forecast for the year and gives me recurring tasks that I can make SOPs for and delegate eventually. 

Clients want answers FAST: 

I changed the amount of notice I need to schedule a consultation call with me. Before it was 24 hours, but I changed it to 3 hours. I almost immediately got a call scheduled for later that same day. It taught me that when people are looking for answers, they want them fast. Shorten that time wherever possible. 

I am getting active on social accounts – primarily Twitter and Facebook: 

I had currently been using Facebook for more local posting to get my name out there. I am a frequent Twitter user that normally just lurked. I decided to rebrand the twitter to talk about basically everything in this section – taxes and business. It's going well so far – in a little over a week, I've got over 65k impressions and gained over 50 followers. I don't want to market on Twitter, I just want to build a group of people I can communicate and work with in the future.  

That's all for the first month of 2024. I'd love to help you out by building you a tax plan for 2024 and anything else on your mind related to business tax. If you tell me you came from the Newsletter, I'll give you a special Tax Invasion discount.  

Here's to growing our businesses in the new year.