Skip to content

Frequently Asked Questions on Taxes for Business Owners for 2025

Contact Us

Tax Deadlines

  • When are the 2024 tax deadlines?

  • S-Corporations and Partnerships: March 17, 2025 (since March 15 is a Saturday)

  • C-Corporations: April 15, 2025

  • Estimated Tax Payments: April 15, June 17, September 16, 2025, and January 15, 2026

  • Extensions: File by the original deadline to get a six-month extension.

  • What happens if I miss a deadline?

  • Penalties and interest apply. For pass-through entities, missing the deadline can result in a late-filing penalty of $205 per partner/shareholder per month.

Depreciation and Asset Limits

  • What are the 2025 Section 179 depreciation limits?

  • The maximum deduction is $1.16 million, with a phase-out threshold beginning at $2.89 million of total equipment purchases.

  • What about Bonus Depreciation?

  • Bonus depreciation is set to phase down in 2025, allowing only 20% for qualified assets placed in service.

  • What qualifies for depreciation?

  • Most tangible personal property, including machinery, vehicles, office furniture, and computers. Some improvements to non-residential real property may qualify under Section 179.

Retirement Contributions

  • What are the 2025 contribution limits for retirement plans?

  • Contributing money to retirement plans like a 401(k) or IRA can significantly reduce your taxable income.

  • 401(k): $23,000, plus a $7,500 catch-up contribution if age 50 or older.

  • IRA: $7,000, plus a $1,000 catch-up for those 50+.

  • SEP-IRA: Up to 25% of compensation or $66,000, whichever is less.

  • SIMPLE IRA: $16,000, with a $3,500 catch-up for those 50+.

  • Defined Benefit Plans: Contribution limits vary based on the plan formula and actuarial calculations.

  • Can my business contribute to my retirement plan?

  • Yes, employer contributions are deductible for the business and vary by plan type. For SEP-IRAs and defined benefit plans, the business can make significant contributions.

  • What are the maximum contributions I can make with a 401(k), Profit Sharing, and Cash Balance Plan?

  • Combining these plans allows high-income business owners to maximize tax-advantaged retirement savings. Here are the limits for 2025:

  1. 401(k):

  • Employee Deferral: Up to $23,000, plus a $7,500 catch-up contribution if age 50 or older.

  • Employer Contribution (Profit Sharing): Up to 25% of eligible compensation, with total contributions capped at $66,000 (or $73,500 if including catch-up contributions for those 50+).

  1. Profit Sharing Plan:

  • Contributions made by the employer cannot exceed 25% of total eligible compensation for the business.

  1. Cash Balance Plan:

  • Contributions are based on age and income, allowing for much larger contributions compared to 401(k) plans.

  • For example, a 50-year-old business owner could contribute over $150,000, while someone in their 60s could contribute well over $200,000, depending on plan design and actuarial calculations.

  • Combined Contribution Limits:

  • The overall limit is determined by adding the maximum allowed contributions for each plan.

  • For 2025, high-income individuals could potentially defer over $300,000 in total contributions by leveraging a 401(k), Profit Sharing Plan, and a Cash Balance Plan together.

  • Who should consider this strategy?

  • High-income business owners looking to reduce taxable income while saving aggressively for retirement.

  • Businesses with stable cash flow, as cash balance plans require mandatory annual contributions.

  • What are the benefits of combining these plans?

  • Significant tax savings through deferred income.

  • Accelerated retirement savings, especially for business owners closer to retirement age.

  • What are the risks?

  • Cash Balance Plans require actuarial calculations and mandatory contributions, even in low-revenue years.

  • Proper planning is essential to ensure the business can sustain contributions.

Miscellaneous

  • What tax credits are available to small businesses in 2025?– The Work Opportunity Tax Credit (WOTC), R&D Tax Credit, and certain energy efficiency credits may still be available.

·         Standard mileage rates for 2025, effective January 1, 2025:

o    Business Use: 70 cents per mile, an increase of 3 cents from 2024.

o    Medical and Moving Purposes: 21 cents per mile, unchanged from 2024.

o    Charitable Organizations: 14 cents per mile, unchanged from 2024.

Pass-Through Entity (PTE) Tax Section for California – 2025

  • What is the California PTE tax election?

  • California’s PTE tax allows partnerships and S corporations to pay state income taxes at the entity level. This provides a workaround for the $10,000 federal SALT deduction cap, enabling owners to deduct state taxes on their federal returns.

  • How do I elect to pay the California PTE tax?

  • The election is made annually.  It’s important to note that if the first payment is not made by June 15, the PTE cannot make the election for that taxable year.

  • What are the payment deadlines for the California PTE tax?

  • First Payment: Due June 15, 2025. This payment must be the greater of:

  • $1,000, or

  • 50% of the total estimated PTE tax liability of the prior year.

  • Second Payment: Due with the entity’s tax return (March 17, 2025) to not incur penalties for late payment of PTE.

  • Who qualifies to make the California PTE tax election?

  • Partnerships and S corporations with qualified owners, which include individuals, trusts, estates, and certain disregarded entities owned by individuals.

  • C corporations and partnerships that are partners in the entity do not qualify.

  • How is the PTE tax calculated?

  • The tax is 9.3% of qualified net income, which is defined as the entity’s total income allocated to qualified owners for California tax purposes.

  • How does the PTE tax benefit owners?

  • Qualified owners receive a credit equal to their share of the PTE tax paid. This credit can be applied to their individual California tax liability, with any excess available for carryforward for up to five years.

  • Are there any changes for 2025?

  • California may adjust rules or rates for the PTE tax. Stay updated by consulting with us.

Business Taxes and Planning

Understanding Business Taxes

Navigating business taxes can be a complex and time-consuming task for any business owner. It’s crucial to understand the various types of business taxes you need to pay and how to file them correctly. The Internal Revenue Service (IRS) requires businesses to file different tax forms based on their structure. For instance, C corporations use Form 1120, partnerships file Form 1065, and sole proprietorships use Form 1040.

Business taxes encompass federal income tax, self-employment tax, employment taxes, excise tax, and more. The type of business tax you pay depends on your business structure. For example, C corporations are taxed on their profits, while sole proprietorships are taxed on the owner’s personal income.

To ensure compliance with tax laws and regulations, it’s essential to keep accurate records of your business income and expenses. This practice not only helps you maximize deductions but also minimizes your tax liability. Consulting with a tax professional or using tax preparation software can significantly aid in tax planning and filing, ensuring you meet all IRS requirements.

Tax Planning Strategies

Effective tax planning is a vital component of successful business operations. It involves analyzing your financial situation and developing strategies to minimize your tax liability. Here are some key tax planning strategies to consider:

  1. Maximize Deductions: Keep meticulous records of all business expenses and deductions to reduce your taxable income.

  2. Take Advantage of Tax Credits: Claim available tax credits for activities such as research and development, renewable energy investments, and hiring new employees.

  3. Utilize Retirement Plans: Contributing to retirement plans like a 401(k) or SEP-IRA can significantly reduce your taxable income.

  4. Plan for Tax Season: Stay organized throughout the year by maintaining accurate records and consulting with a tax professional to prepare for tax season.

By implementing these strategies, you can effectively manage your tax obligations and enhance your business’s financial health.

 

Consulting Services

Tax Services

Financial Statements