In the ever-evolving landscape of business, 2023 brought forth a slew of updates and changes that left many entrepreneurs reevaluating their strategies and ensuring compliance with new regulations. As we take a retrospective look at the challenges faced and changes embraced in the past year, it becomes evident that staying informed and proactive is key to a successful business journey.
In this article, we’ll explore some crucial aspects that business owners tackled in 2023, shedding light on the importance of staying abreast of updates.
Scorp & Pass-thru Entities: Unraveling the MN PTE (Pass-Through Entity Tax) Puzzle
For business owners operating as SCorps or other pass-through entities, 2023 posed a unique challenge in the form of the MN PTE, or Pass-Through Entity Tax. This tax, specific to Minnesota, prompted business owners to consult with their CPAs to determine eligibility and explore the benefits of paying MN withholding directly from their businesses.
NOTE: The Pass-Through Entity Tax is a federal law that applies to all states.
Paying your MN Withholding through your business not only streamlines the process but also offers the advantage of being a deductible business expense.
As the year comes to a close, it’s crucial to check with your CPA promptly to ensure compliance and make any necessary adjustments before the December 31st deadline. Failure to address this in a timely manner may result in missed deductions and potential financial setbacks.
1099-NEC and the Importance of W9s: A Necessary Year-End Ritual
As another year draws to a close, business owners find themselves in the familiar position of preparing to issue 1099-NEC forms to individuals or LLC companies they’ve paid more than $600 throughout the year. This routine process is not just a formality; it is a legal requirement that helps ensure transparency in financial transactions.
To issue accurate 1099-NEC forms, businesses must collect W9 forms from their vendors, containing crucial information such as the taxpayer’s identification number. These forms must be sent to the respective individuals or companies by January 31st, a deadline that holds legal weight.
Here are a few additional notes regarding 1099s:
Issuing a 1099 by January 31st, when you have paid $600.00 or more for services by an individual or company, applies to payments made to an LLC or sole proprietor in cash, check, or through a wire transfer. Where other forms of 3rd party transactions or transfers of payments are processed, the processor will handle the issuance of 1099s to the appropriate parties.
Issuance of 1099 for Venmo Payments:
Venmo’s IRS 1099-K tax reporting requirements only pertain to payments received for sales of goods and services and DO NOT apply to friends and family payments. The IRS will require reporting of payment transactions for goods and services sold exceeding $20,000 and 200 transactions up through December 15th, 2023.
Issuance of 1099 for Cash App Payments:
Personal Cash app accounts do not require the issuance of a 1099 as long as transactions made through the Cash App were for personal reasons.
If goods or services were paid for as a business expense, then a 1099 will need to be filed. However, Cash business accounts with a Cash App will not have to worry about filing a 1099 because account holders are charged a fee for those transactions.
The IRS requires Cash App to issue a Form 1099-K to Cash App for Business account holders who meet the annual reporting threshold for the form. If you have a business account and received more than $20,000 and more than 200 business payments in 2023, then you should expect to receive a Form 1099-K by January 31, 2024.
Debit Card Transactions:
If you purchased goods or services using your business debit card during the tax filing year, you will not need to issue a 1099. If your clients used their debit cards to pay for your goods or services, they should not be issuing a 1099 for you. If you have questions or concerns about this, please reach out to your team at Carefree Bookkeeping or your current CPA.
Bank Reconciliation: More Than Just a Routine Check
Amidst the hustle and bustle of day-to-day business operations, it’s easy to overlook the importance of thorough bank reconciliation. While many businesses rely on bank feeds for quick and easy tracking of transactions, reconciling accounts with actual bank statements is a crucial step often underestimated.
Ensuring that all bank accounts are reconciled with their corresponding statements guarantees accuracy in financial records, preventing the occurrence of double-entered transactions that can lead to financial discrepancies and confusion.
Inflation-Induced Rate Adjustments: Navigating the Financial Landscape
One of the significant challenges faced by business owners in 2023 was navigating the financial landscape shaped by inflation-induced rate adjustments. As the cost of living increased, businesses had to adapt to new economic realities, revisiting pricing strategies and budgeting to remain financially viable.
Being aware of inflation-induced rate adjustments allowed businesses to make informed decisions, ensuring their services or products remained competitive in the market. This adaptability is a testament to the resilience and foresight required to thrive in an ever-changing business environment.
Navigating the Future: Stay Informed About the MN Sick Leave Law Changes in 2024
Looking ahead to 2024, business owners must also be aware of imminent changes to the Minnesota Sick Leave Law. These adjustments, set to take effect in the upcoming year, emphasize the importance of understanding and complying with evolving employment regulations.
In a recently recorded webinar available at https://youtu.be/nuhCEXmtSqg, industry experts delve into the specifics of these updates. From expanded employee coverage to revised accrual rates, these changes aim to enhance workplace well-being and foster a healthier work-life balance. Staying informed about the MN Sick Leave Law is not just a legal obligation but also a strategic move to ensure a harmonious and compliant work environment for your team.
Looking Ahead: Embracing Change and Staying Informed
As business owners continue to adapt to the evolving landscape, understanding and proactively addressing changes in tax laws, financial reporting, and employment regulations will be crucial for sustained success.
For comprehensive support and expert guidance tailored to your business’s unique needs, connect with Carefree Bookkeeping at CarefreeBook.com/contact/.
Let us be your guide in the journey toward financial success in 2024 and beyond.