Are you a small business owner unsure how new tax laws affect your business? You're not the only one! A lot of new changes have made their way into 2021 and 2022, with tax changes coming front and center of importance.
As Benjamin Franklin once said, "In this world, nothing is certain but death and taxes."
And the latter is constantly changing. This is especially true in light of the pandemic and its impact on the economy and businesses. With the introduction of new programs, business owners have been able to survive the after-effects of COVID but will see some notable changes to their taxes.
Here's what you need to know about tax changes for 2022, in particular.
WHAT LAWS WENT INTO EFFECT THIS YEAR?
Depending on where you live and do business, there have been some changes to look out for this year.
First and foremost, a new tax rule has emerged as a result of small changes within the American Rescue Plan Act of 2021. The Act is a $1.9 trillion economic stimulus bill designed to facilitate US recovery from the economic and health effects of the pandemic.
What this may mean for you is that you should expect to receive a 1099-K form sometime after January 31, 2023, for the products or services sold on:
- eCommerce platforms such as Etsy, Amazon, Walmart, eBay, etc.
- Craft shows
The form will be sent to you by the payment services.
According to the Tax Foundation, the following tax changes are also effective this year:
- Maryland introduced the digital advertising tax — the first of its kind, but likely to expand into other states in the coming years.
- Five more states are now allowing "pass-through businesses to be taxed at the entity level to sidestep federal limits on state and local tax (SALT) deductions." New Jersey is a part of this list of more than a dozen states.
- Washington is trying to implement a 7% capital gains tax.
HOW DO THESE AFFECT NEW JERSEY?
Some of the new laws affect New Jersey business owners and residents. With President Biden’s new tax laws, there will likely be an average increase in taxes in most states from 2022 through 2031. You can see how New Jersey will specifically be affected in the Tax Foundation's immersive map.
Some other changes include:
- Retirement Income Exclusion income limit is increased to $150,000.
- The New Jersey Earned Income Tax Credit amount is 40% of the federal EITC for 2021, and the age requirement has expanded to 18 years of age.
- To qualify for the Child and Dependent Care Credit, the taxable income amount increased to $150,000 or less.
WHAT DOES THIS MEAN FOR SMALL BUSINESSES?
The impact of the pandemic on businesses and the economy led to several new programs such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Economic Injury Disaster Loan (EIDL), Employee Retention Tax Credit (ERTC), Families First Coronavirus Response Act (FFCRA), and Business interest expense deduction increases.
These changes resulted in some shifts to business taxes, affecting income taxes, self-employment taxes, employment taxes, excise taxes, estimated taxes, and more.
The key to getting through these changes without any major mistakes is getting the right tax guidance.
Amid changing legislation, now is the best time to partner with a small business CPA who is able to stay on top of these changes and act proactively on your behalf versus reacting to certain changes when it's too late. 2022 will be one of the most challenging tax years for small business owners, but a qualified tax advisor can make all the difference.
HOW SCHWARTZ IS HELPING SOUTH JERSEY SMALL BUSINESS OWNERS
Navigating these legal changes and what it means for your small business in New Jersey can be one of the biggest challenges you face in the coming years. Fortunately, Schwartz & Associates is already familiar with relevant tax laws and regulations you need to comply with, including the impact of the Biden Administration's new tax proposals. The American Families Plan (AFP) and American Jobs Plan (AJP) will bring with them new taxes on businesses in the coming year, and Schwartz is prepared to ensure your South Jersey business is not only in compliance but maximizing its benefits.
Contact us for more insight into what these changes may mean for your business specifically and what we can do to ensure you're getting the most out of your deductions.