Returning Value Blog

If you read the Internal Revenue Code (and you probably don’t want to!), you may be surprised to find that most business deductions aren’t specifically listed. For example, the tax law doesn’t explicitly state that you can deduct office supplies and certain other expenses. Some expenses are detailed in the tax code, but the general rule is contained in the first sentence of Section 162, which states you can write off “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.”

Machen McChesney is committed to keeping you informed about critical developments that may impact your business. Today, we would like to bring to your attention an important update from the Internal Revenue Service (IRS) concerning the Employee Retention Credit (ERC) program.

Does your business receive large amounts of cash or cash equivalents? If so, you’re generally required to report these transactions to the IRS — and not just on your tax return.

It’s common for high-growth and seasonal businesses to have occasional shortfalls in their checking accounts. The reason relates to the cash conversion cycle — that is, it takes time to collect on customer invoices. In the meantime, employees and suppliers want to get paid. The “cash gap” is currently getting wider for many companies. A recent study by CFO / The Hackett Group shows that the cash conversion cycle increased from 35.2 days in 2021 to 36.4 days in 2022. To add insult to injury, interest rates, and many operational costs are rising.

The U.S. government has repeatedly revised the requirements for U.S. taxpayers to claim the Employee Retention Credit ("ERC"), also commonly known as the Employee Retention Tax Credit, since its initial codification into law. As a result, many eligible taxpayers have been left uncertain as to whether they may properly claim this often-valuable tax credit. Because there is a strict statute of limitations on claiming the ERC, potentially eligible taxpayers that have not already claimed the ERC should review their eligibility under current U.S. law as soon as possible.  

Many businesses use independent contractors to help keep their costs down — especially in these times of staff shortages and inflationary pressures. If you’re among them, be careful that these workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be an expensive mistake.

Many businesses in certain industries employ individuals who receive tips as part of their compensation. These businesses include restaurants, hotels, and salons.

With the 2023 filing season deadline drawing near, be aware that the deadline for businesses to file information returns for hired workers is even closer. By January 31, 2023, employers must file these forms:

Although the national gas price is a bit lower than it was a year ago, the optional standard mileage rate used to calculate the deductible cost of operating an automobile for business will increase in 2023. The IRS recently announced that the 2023 cents-per-mile rate for the business use of a car, van, pickup, or panel truck is 65.5 cents. These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.

If you own a business, you may wonder if you’re eligible to take the qualified business income (QBI) deduction. Sometimes this is referred to as the pass-through deduction or the Section 199A deduction.