S5 Bookkeeping & Tax Service, LLC

Haven’t posted in a while, but I truly love when I get messages from clients like this. Makes the long days and stress and little more manageable.

Looking for some year end deductions?

Bookkeeping tips… if you need any help cleaning your books up give us a call 281-259-8595 or text 281-205-1193

Hope everyone has a blessed day and have many things to be thankful for today and everyday!

Don’t let this be you, contact us today to get your books up to date and tax ready

Who can agrees, but wouldn’t have it any other way…

We have many things we are thankful for, what about you?

Act Now: Claim Your 2020 and 2021 Employee Retention Credit (ERC)

During much of 2020 and 2021, you may have qualified for the Employee Retention Credit (ERC).

With the ERC, you found (or could find) tax credits of up to $26,000 per employee. That’s a lot. With 10 employees, that’s $260,000.

Three Ways to Qualify


1.
Decline in gross receipts (on a quarterly basis, by more than 50 percent in 2020 compared with 2019, and by more than 20 percent in 2021 compared with 2019)

2.
Government order that caused a full or partial shutdown (think physical space)

3.
Government order that caused more than a nominal effect (think modification of activity)

If you fall into these categories give us a call to see how much you could qualify for.

2022 Last-Minute Year-End General Business Income Tax Deductions


Here are some powerful business tax deduction strategies you can easily understand and implement before the end of 2022.

1. Prepay Expenses Using the IRS Safe Harbor


You have to thank the IRS for its tax-deduction safe harbors.

IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.1

Under this safe harbor, your 2022 prepayments cannot go into 2024. This makes sense because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.

For a cash-basis taxpayer, qualifying expenses include (among others) lease payments on business vehicles, rent payments on offices and machinery, and business and malpractice insurance premiums.

Example. You pay $3,000 a month in rent and would like a $36,000 deduction this year. So on Friday, December 30, 2022, you mail a rent check for $36,000 to cover all of your 2023 rent. Your landlord does not receive the payment in the mail until Tuesday, January 3, 2023. Here are the results:

·
You deduct $36,000 this year (2022—the year you paid the money).

·
The landlord reports $36,000 as rental income in 2023 (the year he received the money).


You get what you want—the deduction this year.

The landlord gets what he wants and likely more—next year’s entire rent in advance, eliminating any collection problems while keeping the rent taxable in the year he expects it to be taxable.

Don’t surprise your landlord. If he had received the $36,000 of rent paid in advance in 2022, he would have had to pay taxes on the rent money in 2022. So, before sending a big rent check to your landlord, make sure he understands the strategy. Otherwise, he might not deposit the rent check (thinking your payment was a mistake) and instead might return the check to you. This could put a crimp in the strategy because you operate on a cash basis.

Also, think proof. Remember, the burden of proof is on you. How do you prove that you mailed the check by December 31? (Think like an IRS examiner or, better yet, a prosecuting attorney.)

Here’s the answer: Send the check using one of the U.S. Postal Service’s tracking delivery methods, such as priority mail with tracking and possibly signature required. Or even better, use one of the old standards that the IRS has to abide by, such as certified or registered mail.

With these types of mailings, you have proof of the date you mailed the rent check. You also have evidence of the date the landlord received the check.

If you are using USPS online tracking, make sure to print the delivery and receipt tracking results for your tax records, because that tracking information disappears from the postal service records long before you would need it for the IRS.


2. Stop Billing Customers, Clients, and Patients


Here is one rock-solid, time-tested, easy strategy to reduce your taxable income for this year: stop billing your customers, clients, and patients until after December 31, 2022. (We assume here that you or your corporation is on a cash basis and operates on the calendar year.)

Customers, clients, patients, and insurance companies generally don’t pay until billed. Not billing customers and patients is a time-tested tax-planning strategy that business owners have used successfully for years.

Example. Jake, a dentist, usually bills his patients and the insurance companies at the end of each week. This year, however, he sends no bills in December. Instead, he gathers up those bills and mails them the first week of January. Presto! He just postponed paying taxes on his December 2022 income by moving that income to 2023.

3. Buy Office Equipment


With bonus depreciation now at 100 percent along with increased limits for Section 179 expensing, buy your equipment or machinery and place it in service before December 31, 2022, and get a deduction for 100 percent of the cost in 2022.2

Qualifying bonus depreciation and Section 179 purchases include new and used personal property such as (among other types) machinery, equipment, computers, desks, furniture, and chairs (and certain qualifying vehicles).

Planning note. If you qualify for the Section 199A deduction, the increased expenses will reduce your deduction as explained in 2022 Last-Minute Section 199A Tax Reduction Strategies.

4. Use Your Credit Cards Correctly


If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense.Therefore, as a Schedule C taxpayer, you should consider using your credit cards for last-minute purchases of office supplies and other business necessities.

If you operate your business as a corporation, and if the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

But if you operate your business as a corporation and you are the personal owner of the credit card, the corporation must reimburse you if you want the corporation to realize the tax deduction, and that happens on the date of reimbursement. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.

2022 Last-Minute Vehicle Purchases to Save on Taxes

1.
Do you need a replacement business car, SUV, van, or pickup truck?

2.
Do you need tax deductions this year?

3.
Do you need a tax credit to offset what you owe to the IRS?


If you answered yes to any of these questions, you need to keep reading and get ready to smile.

Thanks to the Tax Cuts and Jobs Act (TCJA), you can write off the cost of a vehicle purchase in 2022—including, in many cases, up to 100 percent of the cost—faster than ever before.

And if you plan on purchasing an electric car or a plug-in hybrid electric vehicle, you may qualify for a tax credit of up to $7,500.

Get the Timing Right


Don’t procrastinate. If you want the vehicle deduction and/or the tax credit, you need to

·
own the vehicle, and

·
place it in business service


on or before December 31, 2022.

To ensure compliance with the “placed in service” rule, drive the vehicle at least one business mile on or before December 31, 2022. In other words, you want to both own and drive the vehicle to ensure that it qualifies for the big deductions.1

Now that you have the basics, let’s get to the tax deductions.

1. Buy a New or Used SUV, Crossover Vehicle, or Van


Let’s say that on or before December 31, 2022, you or your S corporation buys and places in service a new or used SUV or crossover vehicle that the manufacturer classifies as a truck and that has a gross vehicle weight rating (GVWR) of 6,001 pounds or more. This newly purchased vehicle gives you:

·
The ability to elect bonus depreciation of 100 percent (thanks to the TCJA)

·
The ability to select Section 179 expensing of up to $27,000

·
MACRS depreciation using the five-year table

·
No luxury limits on vehicle depreciation deductions


Yes, you read that right: bonus depreciation applies to both new and used property, thanks to the TCJA tax reform.2

Example 1. On or before December 31, 2022, you buy and place in service a used $50,000 qualifying SUV for which you can claim 90 percent business use. Your business cost is $45,000 (90 percent x $50,000). Your maximum write-off for 2022 is $45,000.

If you don’t want 100 percent bonus depreciation in 2022, you can take three steps:

1.
Elect out of bonus depreciation for that property class.

2.
Expense any portion of the business cost of up to $27,000 using Section 179.3

3.
Take the remaining cost using MACRS depreciation over five years.


From what we’ve seen, almost all SUVs, crossover vehicles, and vans with a GVWR of 6,001 pounds or more qualify as trucks for purposes of both 100 percent bonus depreciation and the up-to-$27,000 Section 179 expensing election.