New Treasury Reporting Rules for Business Owners?

Plus: IRS releases ERC withdrawal guidelines.

Hi there,

As there’s a little over 10 weeks left in 2023, it’s important to make sure your tax planning is accurate and aligns with your goals. On to today’s top 3…

1) Why Are We Doing This? 

A client asked a very sincere question this past week as we finalized his tax return and I let them know about some issues I was seeing in his books for his businesses that he need to correct. He said accounting has caused him a huge headache over the past couple years (he’s a REI with a flipping/wholesale business, and a slew of rentals) and what’s even the point of keeping the books except to prepare a tax return?

The main reason why business owners need real-time data from their financials is so they can use that information to make immediate, strategic decisions in their business. For this individual, I told them this could mean:

  • Comparing budgeted to actuals on flips to see profitability as project progresses.

  • Understand tax position throughout the year & make decisions accordingly.

  • Analyze what your free cash flow on rentals is.

  • Know how leveraged you are on properties you’re thinking about refi-ing or making improvements on.

  • Use data to project-out the rest of the year’s financials

  • Understand ongoing costs (cost of goods sold and overhead) as a % of gross revenue

With another client I recently took on, once we got their books up to date we could easily see one of their divisions was sucking all the cash from the profitable division, and that was due to a bloated payroll, so immediate adjustments could be made to stop the bleeding.

Every decision you make in a business always will tie back to the finances, so it’s imperative you allow the finances to give you the feedback you need from those decisions.

You might have seen this in prior newsletter issues, but the deadline for the new federal law requiring LLC to disclose “beneficial owners” draws near. This is one extra filing requirement that should make freelancers/solopreneurs take pause and think about whether they REALLY need an LLC for their business.

Here are the filing dates you need to be aware of:

  • If the LLC was created before 1/1/24, you can file your initial report between 1/1/24 and 1/1/25.

  • If you create your LLC on or after 1/1/24, you need to file your initial report within 30 days of receiving notice of it’s creation

The IRS has released instructions for businesses who have submitted for the ERC but have realized they don’t qualify, and now want to withdrawal their claim. This is for businesses who have NOT received any ERC money (or cashed the check if received).

The instructions vary based on where you are in the process, but I’m more curious to see how the IRS handles businesses who did cash the checks, and now want to return the money. My suggestion would be to waive interest and penalties for any businesses return the ERC in exchange for providing information on the company who submitted the claim.