Tax season is just around the corner; one of the most stressful times of year for business owners. Compliance regulations, deadlines and forms create a hefty burden for organizations, not giving them the freedom to focus on their business operations or their people.
One of the benefits of partnering with a PEO like BCN Services…we can help to navigate during these times and provide administrative assistance when it comes to payroll related taxes. Take a look below at some key items to review before tax time.
The IRS has announced that the amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022. This also applies to 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan. Also increasing is the catch-up contribution limit for employees aged 50 and over who participate in the above plans. This limit has increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), and most 457 plans or the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000 starting in 2023. The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.
The limit on annual contributions to an IRA will increase to $6,500 in 2023, up from $6,000. The IRA catch‑up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
HSA Limits
The HSA contribution limit for self-only for 2023 is up slightly to $3,850; for family, it is also up slightly to $7,750. The catch-up contribution for age 55 and older remains at $1,000.
Tax Year 2023 Annual Inflation Adjustments
The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700, which is up $1,800 from the previous year. For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900, and for heads of household, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022. For tax year 2023, the top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly). Other rates have also changed; work with a tax professional to see where you are so you can make any necessary withholding adjustments.
The Affordable Care Act
The IRS is reminding both individuals and businesses that this is very much in force and there have been recent adjustments. In mid-2022, the IRS announced annual adjustments to the ACA. According to the Society for Human Resource Management, the “2023 health plan affordability threshold — used to determine if an employer’s lowest-premium health plan meets the Affordable Care Act’s (ACA’s) affordability requirement — will be 9.12 percent of an employee’s ‘household income,’ down from the 2022 limit of 9.61 percent.”
Mileage Change
Driving for business? The IRS increased the optional standard mileage rates for the final six months of 2022 to 62.5 cents per mile. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes. Check your driving logs for dates to take advantage of the full amount.
Whether you’re an employee or a business owner, work with your tax adviser to keep on top of your due dates and responsibilities. For now, gradually gather the information you will need at tax time. Forbes and Nerdwallet have both provided helpful lists. (Laws may change every year, but the list of what the IRS needs, based on your situation, stays pretty much the same.)
Tax season is a challenging time for companies of all sizes, but especially for those that do not have the time, budget or resources to manage all aspects of the process. As a Professional Employer Organization (PEO), BCN can help to eliminate your payroll related tax administrative burden during this time. We can help by processing your business payroll taxes and keep up with the corresponding payroll related filing regulations and deadlines.
Contact our team today at https://info.bcnservices.com/nextlevel or 1.734.994.4100.
© Copyright 2022, BCN Services. All Rights Reserved. This content is available for informational purposes only. BCN Services is not rendering legal advice or service. If you would like to have a discussion regarding this HR related topic, contact our team today at https://info.bcnservices.com/nextlevel.