It’s time for a mid-year tax checkup


Summer may be prime time for vacation, but it’s also the perfect time for businesses to do a mid-year tax checkup.

Evaluating where your business stands, including whether you are running at a profit or a loss, helps you to better manage cash flow and allows you to make accurate projections for the rest of the year. With proactive planning now, entrepreneurs will be better prepared to take advantage of tax-reducing strategies when it’s time to file their taxes.

And with the current economic uncertainty, from inflation and interest rate changes to a possible recession, there’s no time like the present.

Prepare for disaster losses

In Florida, summer is synonymous with hurricane season. Businesses and individuals should have contingency plans in place, which may include:

  • Electronic backups to help safeguard company records and tax documents
  • Business interruption insurance, which covers profits lost during a natural disaster
  • Flood insurance to protect your building and/or its contents

If your business is impacted by a storm or other natural disaster, consider whether it makes sense to accelerate disaster losses under IRC Section 165(i). This may give you faster access to much-needed cash. If you accelerate losses, you may be able to request a “quick refund” by filing Form 4466. Talk with your tax advisor about disaster loss-related tax strategies, and keep an eye on IRS updates regarding disaster tax relief.

Enhance retirement plans

Companies that expect to report a profit this year should consider creating, funding or enhancing retirement plans. Employer contributions to retirement plans are usually tax-deductible, and you may even get a tax credit for starting a plan – potentially a win-win for employers and employees.

Consider charitable contributions

Donating property or goods or making cash contributions to non-profit organizations can enable businesses to reduce their tax liability while doing good for the community – another easy win-win.

Compare budgets and forecasts

How is your business doing compared to your budgets and forecasts for this year? Are you on track? While mid-year is a good time to do a tax checkup, it’s also a great time to assess the health of your business. If you have been feeling like you’re spending too much time working in your business, and not enough time working on your business, it may be time to adjust your focus.

Review insurance policies

Do you have an insurance-backed buy-sell agreement in place? What about disability insurance? And when was the last time you reviewed your life insurance policy? If you are missing any of the insurance coverage above, or if it’s been a while since you looked at your policy, you may benefit from speaking with an insurance professional.

Check tax withholding

Business owners and individuals should review their tax withholding and estimated payments and make adjustments as needed. If you owed taxes when you filed for last year, you may want to revise your Form W-4. If you make estimated tax payments throughout the year, take a look at your tax situation for this year to avoid underpaying or overpaying. The IRS’s Tax Withholding Estimator is a helpful tool.

Don’t overlook tax credits and incentives

Capital investments, research and experimentation, and energy credits should be evaluated as you continue to invest in your business. Many businesses miss out on significant tax savings because they don’t realize they can qualify for tax credits and incentives, such as the federal research credit (aka R&D tax credit). Designed to reward companies in a wide range of industries for increasing investments in research and development, the R&D tax credit may potentially be used by any company that is developing new or improved products, software or manufacturing processes.

Check eligibility for Employee Retention Credit

If you haven’t already talked to a qualified tax professional about the possibility of claiming the Employee Retention Credit (ERC) from the COVID-19 years, inquire. You might be surprised to find out that your business can qualify. Qualified taxpayers may have until 2024 or even 2025 to claim the ERC, depending on when they filed and paid. However, beware of scammers. The IRS has been warning businesses of predatory consultants targeting taxpayers with aggressive claims and high fees. Contact a Kaufman Rossin tax professional to learn more about eligibility requirements for the Employee Retention Credit.

The above considerations are just a few of the areas to keep in mind as you plan for the remainder of this tax year. Operational and economic changes could impact your organization’s tax strategies, so it’s important to stay in touch with your tax and financial advisors throughout the year. Being proactive in the middle of the year can help to minimize your tax bill and allow for more flexibility in year-end tax planning when the time comes.

Scott Berger, CPA, is a Entrepreneurial Services Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.

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