A New Deadline for Business Tax Payers Is Announced
(RightWing.org) – In 2020, millions of Americans lost jobs as the government locked down businesses to prevent the spread of COVID-19. In September 2021, the US Bureau of Labor Statistics (BLS) reported people started small businesses in record numbers. There were so many the government noted a report showing the increase from 2019 to 2020 was double the growth rate, and almost all of it occurred in the second half of the year. In 2021, it didn’t slow down.
Becoming one’s own boss comes with a lot of perks and also a few headaches. Among the latter is dealing with taxes and the IRS. If business owners don’t pay attention to tax rules, including a new tax deadline, it can cause problems for their bottom line.
January Tax Deadline Looms
While 2020 was a great year for business startups, 2021 was also impressive. According to census data, 5.4 million new applications were submitted to start a company in 2021 — that’s a 53% increase from 2019. Helping drive the way was online retail, tech and scientific services, professional fields, and trucking and warehousing.
Americans are used to filing taxes by the April deadlines. Yet, in January 2023, many companies may experience a unique tax-paying opportunity. For those who took advantage of deferring some Social Security taxes in 2020, the taxman is looking for his money.
At the beginning of 2022, the IRS required small businesses to repay 50% of the Social Security tax they withheld in 2020. On January 3, 2023, the other half is owed to the government. The IRS has been sending out letters to remind entrepreneurs of their tax obligation and the due date.
New IRS Form Coming for 2022 Taxes
When business owners file their taxes for 2022, there’s another wrinkle in the law many may not be aware of. If a company or entrepreneur collects revenue from PayPal, Venmo, or other third-party digital payment processors, they will likely receive a 1099-K for payments of $600 or more.
This is a change from the past. It used to be that those who used third-party processors only got a 1099-K if they received payments of more than $20,000 and there were more than 200 individual transactions.
Tax experts say those who receive money through services like PayPal but are not business-related should check the new IRS form to make sure it was not included so that they are not taxed. For example, if you received money as a gift from a friend or family member, it isn’t taxable as income. Still, tax professionals recommend business owners keep personal PayPal or third-party payment processors separate from business ones to avoid potential problems.
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