What’s New for Small Businesses in February: Tax Updates and Tips
February is a crucial month for small businesses as tax deadlines and updates come into focus. Staying ahead of these changes can save time, money, and stress as you navigate the season. Whether you’re filing your taxes or making financial adjustments, here’s what small businesses need to know this month:
1. 1099 Filing Deadlines
By now, all 1099-NEC forms for non-employee compensation should have been sent to contractors and filed with the IRS. If you missed the January 31 deadline, file as soon as possible to reduce penalties.
For businesses filing other 1099 forms, such as 1099-MISC or 1099-DIV, double-check deadlines and ensure that you have all recipient information on file. Staying compliant with these reporting requirements is essential to avoid fines.
2. Quarterly Estimated Tax Payment Adjustments
Although the next estimated tax payment isn’t due until April 15, February is a great time to evaluate your 2024 estimated payments so far. Take a moment to review:
•Revenue growth or decline.
•New deductions or credits that may reduce your taxable income.
•Underpayments from previous quarters.
Making adjustments now can help avoid surprises at tax time.
3. Depreciation Changes for 2024
Small businesses should take note of the reduction in bonus depreciation for assets purchased in 2024. Bonus depreciation decreased from 80% in 2023 to 60% in 2024 and will continue to decline by 20% each year until it phases out completely, meaning you may not be able to fully deduct the cost of certain equipment or property in the first year. Be sure to discuss your depreciation strategy with your tax professional to maximize your deductions under the new rules.
4. Employer-Provided Benefits Updates
If your business provides benefits like health insurance or retirement plans, now is a good time to:
•Confirm payroll systems reflect accurate contributions.
•Update employees on any changes in their benefits.
•Ensure that these benefits are correctly reported on W-2 forms.
Additionally, some states may have new or updated requirements for paid family leave or retirement programs—review your obligations to stay compliant.
5. State-Specific Tax Changes
For Virginia-based small businesses, don’t forget about specific local updates:
•Virginia Minimum Wage Updates: Ensure your payroll reflects the state’s updated minimum wage, which may have changed at the start of the year. Virginia is currently $12.41 and will increase every year.
If your business operates in multiple states, check for any state-specific tax law changes that may impact compliance. Here is a chart of all minimum wages by states - https://www.paycom.com/resources/blog/minimum-wage-rate-by-state/
6. Take Advantage of Available Credits
Small businesses investing in growth or innovation may qualify for significant tax credits. Here are a few to consider:
•R&D Tax Credit: If your business is involved in developing new products, processes, or software, you could qualify for a federal research and development credit.
•Energy Efficiency Incentives: Businesses investing in energy-efficient equipment, vehicles, or buildings may be eligible for federal or state tax incentives.
These credits can reduce your tax liability and free up cash for reinvestment in your business.
Proactive Steps for Small Businesses
•Reconcile Accounts: Use February to reconcile your accounts for January. Accurate records will make tax preparation smoother.
•Organize Tax Documents: Gather key financial documents like receipts, payroll records, and previous year tax returns.
•Consult a Tax Professional: If you’re unsure about new tax laws or credits, a professional can help you maximize savings and ensure compliance.
7. BOI Filing Requirements: The Beneficial Ownership Information (BOI) filing is currently voluntary. This new reporting requirement has undergone several changes in recent months. To stay up-to-date on the latest status and requirements, visit the official site: https://boiefiling.fincen.gov/.
Final Thoughts
February is the perfect time for small businesses to get ahead on tax preparation and make strategic financial adjustments. By staying informed and proactive, you can navigate tax season with confidence and keep your business moving forward.
If you need help preparing your business taxes, understanding new credits, or managing payroll compliance, I’m here to help. Let’s make this tax season as smooth and stress-free as possible for your business.