The beginning of the 2023 tax filing season is Jan. 29, 2024, but you don’t have to wait until then to get a start on preparing filing documents for your construction business. Every year, there are important dates to remember as you prepare to file:
- Jan. 12: IRS Free File opened
- Jan. 16: 2023 fourth quarter estimated tax payments due
- Jan. 26: Earned Income Tax Credit Awareness Day
- Jan. 29: Filing season start date
- April 15: Tax return or to extension request deadline
- April 17: Due date for Maine and Massachusetts
- Oct. 15: Extension filers due date
TYPES OF TAXES
There are several different types of taxes construction businesses should be prepared to pay. Sales taxes must be paid for any physical items sold, like equipment and materials, but you’ll also have other taxes, like property taxes, permits and licenses and more.
When dealing with state and local taxes, income taxes and employment taxes are the most common you’ll have to submit. Your type of business structure will play a part in your tax obligation and, if you have any employees, you will be required to pay state employment taxes. These taxes usually include workers’ compensation insurance, disability insurance and more, but your responsibility will vary based on the state where you conduct business.
Federal tax obligations will also depend on your business structure. In general, there are five kinds of business taxes:
- Income tax: Taxes paid throughout the year on any income made.
- Estimated taxes: Additional tax that may be necessary based on minimum income tax requirements and different forms of income (like interest, capital gains and more).
- Self-employment tax: Social security and Medicare tax for self-employed individuals.
- Employment taxes: These are taxes that must be paid if you have employees, like Medicare tax or federal unemployment taxes.
- Excise tax: Taxes that must be paid based on your type of business, products sold, or kinds of equipment used.
IMPORTANT UPDATES FOR CONSTRUCTION
There can be updates and slight changes into filing for certain tax credits, deductions and more. Here are a few updates to keep in mind when filing for the 2023 tax year:
- Employee Retention Tax Credit (ERTC): This credit was a direct response to support businesses during the COVID-19 pandemic. The last year to retroactively claim this credit will be 2024 (possibly 2025 in some cases).
- Inflation Reduction Act of 2022: This act expanded a lot of tax laws, particularly for the 179 D deduction and the 45L tax credit program. However, this act is a 10-year plan, so not all the changes will happen simultaneously. Check with the IRS for any updates to this act that may affect your 2023 filing.
- Bonus Depreciation: Under the Tax Cuts Jobs Act, business could deduct 100% of acquisition costs from property purchases Sept. 28, 2017-Dec. 31, 2022. Each year, this amount will be limited. So, for the 2023 filing, the deduction is capped at 80%. This will continue to decrease until the program ends entirely in 2027.
This isn’t a full list of all changes for the 2023 filing year, but it’s a good start in identifying some important updates for your business.
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