Don't Wait! Start Now! Year-End Tax Planning Ideas for Franchisors, Franchisees and Individuals

by Michael Iannuzzi

It is hard to believe that 2023 is upon us! As we begin a new year, now is the time to plan in advance for tax savings strategies and start to plan for the future.

Business strategies:

• If you are a cash basis taxpayer and you are projecting taxable income for the year, plan to pay for items that you know you need so you can deduct those expenses in the current year.

• If you are looking to buy equipment, or other depreciable assets, it could be great to purchase those items during this year and place them in service prior to the end of the year so you can take advantage of bonus depreciation or section 179 depreciation.

• Depending on the entity type, you may have certain net operating losses that you are carrying forward. Now could be a good time to have those net operating losses analyzed to see if you could take advantage of them for this year.

• Do you have a profit-sharing plan set up for your employees? If so, employer contributions to the plan could be deductible. There are several types of plans available that could be explored to maximize contributions for the owners while taking care of the employees.

• Accrual based taxpayers should make sure all relevant accounts payable and accruals are recorded on their books as of December 31, 2002, and that 2023 accounts payable and accruals are paid in 2024 by the IRS allowable guidelines.

Individual strategies:

• If you are part of a health savings account plan, you can check with your plan administrator to maximize your contributions to that plan. There are different contribution limits for individual coverages and those with family coverage. Certain health savings account plans also have investment features in them after you have a specified amount of money available in your account.

• Are you on pace to maximize your 401k or Roth retirement plan contributions? 401k contributions are deductible now as opposed to Roth contributions.

• Certain states have state tax benefits for contributing to your state’s 529 Plan which allows you to save on state taxes while saving for your children’s college education. Check with your local state to see how these contributions are treated for your own state’s tax purposes.

• There are increased tax rebates for certain energy efficient products such as installing solar panels on your home. If you were considering making an investment like this, you should confirm the tax rebates on making these type of purchases.

As you can see there are a number of both business and individual tax strategies that you could take advantage of whether you are a franchisor or a franchisee. Proper planning, budgeting, and projections are the key to maximizing your tax savings strategies and preserving cash flow for future operations. The ideas presented are general and may or may not apply to your type of business, entity structure, or personal situation.

Please check with your business and or personal tax advisor on these items.

About Michael Ianuzzi:

Michael Iannuzzi is a partner and co-leader of the firm’s franchise practice providing audit and accounting, business consulting and advisory, and tax planning services to a wide spectrum of franchise related businesses. Michael works with franchisors and multi-unit franchisees in a variety of industries, including, but not limited to, fitness and athletic centers, children entertainment centers, junk removal companies, mobile concepts, Quick Service Restaurants (QSRs), and grocery stores.

Links:

miannuzzi@citrincooperman.com

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