Returning Value Blog

If you ask some business owners why they do things a certain way, they might answer, “Because we’ve always done it that way.” But with all the changes that have taken place in the financial and accounting realm, doing things the way you’ve always done them could be costing your business in terms of lost efficiency and profits. Here are five considerations to help modernize your accounting processes and systems.

Learn how to create an effective payroll budget to avoid wondering how and where your money was spent. Creating a payroll budget helps you understand what percentage of your budget should go to payroll and enables you to stay on track throughout the year. Generally, payroll should account for about 15% to 30% of your company’s gross income, but with service industries, costs can be as high as 50%.

The endgame is accurate and timely employee paychecks. How do you get there? Have a payroll plan that outlines what the procedures are to get to your goal.

Bookkeeping is essential to running a business. QuickBooks® is one of the most popular software programs for this purpose because it offers numerous features that other programs may not have.

Bonuses, frequently given at the end of the year, is a popular "thank you" for a job well done, and smart business owners know they can build loyalty, helping retain the most productive employees. However, both owners and employees often misunderstand how taxes work with bonuses, leading to confusion and frustration. Fortunately, with some education and preparation, the situation can work out for everyone.

The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $160,200 for 2023 (up from $147,000 for 2022). Wages and self-employment income above this threshold aren’t subject to Social Security tax.

In today’s tough job market and economy, the Work Opportunity Tax Credit (WOTC) may help employers. Many business owners are hiring and should be aware that the WOTC is available to employers that hire workers from targeted groups who face significant barriers to employment. The credit is worth as much as $2,400 for each eligible employee ($4,800, $5,600, and $9,600 for certain veterans and $9,000 for “long-term family assistance recipients”). It’s generally limited to eligible employees who begin work for the employer before January 1, 2026.

Businesses operating across state lines must determine the amount of their income that is subject to tax in each state. Generally, this is done using what is known as “formulary apportionment.” Given that states regulate the apportionment methods they allow and are not required to use a uniform approach, the varying methods — especially the different ways states source and weight a taxpayer’s sales activities — may result in excessive taxation overall. Multi-state businesses should review the apportionment options and rules in the states and localities where they are taxable for potential opportunities to reduce their tax bill and to ensure they are reporting and paying the correct amount of tax.

For the final six months of 2022, the standard mileage rate for business travel will increase by 4 cents per mile, from 58.5 to 62.5 cents per mile, according to IRS Announcement 2022-13. The rate for deductible medical or moving expenses will likewise increase from 18 to 22 cents per mile.

Businesses should be aware that they may be responsible for issuing more information reporting forms for 2022 because more workers may fall into the required range of income to be reported. Beginning this year, the threshold has dropped significantly for the filing of Form 1099-K, “Payment Card and Third-Party Network Transactions.” Businesses and workers in certain industries may receive more of these forms, and some people may even get them based on personal transactions.