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2022 Q4 tax calendar: Key deadlines for businesses and other employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2022. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

Note: Certain tax-filing and tax-payment deadlines may be postponed for taxpayers who reside in or have businesses in federally declared disaster areas.

Monday, October 3

The last day you can initially set up a SIMPLE IRA plan, provided you (or any predecessor employer) didn’t previously maintain a SIMPLE IRA plan. If you’re a new employer that comes into existence after October 1 of the year, you can establish a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence.

Monday, October 17

  • If a calendar-year C corporation that filed an automatic six-month extension:
    • File a 2021 income tax return (Form 1120) and pay any tax, interest and penalties due.
    • Make contributions for 2021 to certain employer-sponsored retirement plans.

Monday, October 31

  • Report income tax withholding and FICA taxes for third quarter 2022 (Form 941) and pay any tax due. (See exception below under “November 10.”)

Thursday, November 10

  • Report income tax withholding and FICA taxes for third quarter 2022 (Form 941), if you deposited on time (and in full) all of the associated taxes due.

Thursday, December 15

  • If a calendar-year C corporation, pay the fourth installment of 2022 estimated income taxes.

Contact us if you’d like more information about the filing requirements and to ensure you’re meeting all applicable deadlines.

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Cyber risks: A critical part of your auditor’s risk assessment

As businesses and not-for-profit entities increasingly rely on technology, cyberthreats are becoming more sophisticated and aggressive. Auditors must factor these threats into their risk assessments. They can also help you draft cybersecurity disclosures and brainstorm ways to mitigate your risk of an attack.

Increasing risks

How much does a data breach cost? The average has reached an all-time high of $4.35 million, according to the newly released “Cost of a Data Breach Report 2022.” The report, published by independent research group Ponemon Institute, also found that 83% of respondents have experienced more than one data breach.

Another key finding is that the average cost of a data breach increased by roughly 13% during the pandemic. Why? One reason is the increase in remote working arrangements. Many organizations now have sensitive data stored in more places than ever before — including laptops, cloud-based storage, email, portals, mobile devices and flash drives — providing many potential areas for unauthorized access.

Ransomware attacks are also on the rise, in part due to geopolitical instability. According to the study, ransomware attacks were up 41% in 2022 compared to the previous year. These attacks cost organizations an average of $4.54 million per incident in 2022, excluding any ransom paid to the perpetrator. Ransomware attacks generally take longer to detect and contain than other types of data breaches.

Targeted data

Hackers may try to steal valuable information about your organization’s employees and customers. Examples include payment card data, protected health data and personal identifiable information, such as phone numbers, addresses and Social Security numbers.

Another target may be valuable intellectual property, such as customer lists, proprietary software, formulas, strategic business plans and financial data. These intangible assets may be sold or used by competitors to gain market share or competitive advantage.

Risk assessment

As the frequency and severity of cyberattacks have increased, data security has become a critical part of the audit risk assessment. In recent years, the Public Company Accounting Oversight Board (PCAOB) has interviewed auditors of companies that have experienced a cybersecurity breach.

These interviews reveal that audit firms provide varying levels of guidance, both when assessing risk at the start of the engagement and when uncovering a cybersecurity incident that occurred during the period under audit or during audit fieldwork. For example, auditors usually ask management what’s being done to understand, detect and prevent computer system breaches.

Another key finding of the PCAOB research is that the costs associated with cybersecurity breaches may not always be apparent. A major cybersecurity breach can cause more than lost profits; it may also result in a loss of customers, reputational damage and even bankruptcy.

We can help

Though PCAOB’s research focuses on public companies, any organization can be the victim of a cyberattack. And the effects may be even more devastating for those with fewer resources to absorb the losses and assign dedicated staff to respond to breaches. Our firm is atop the latest cybersecurity trends. Our auditors can help your organization assess its cyber risks and improve the effectiveness of internal controls over sensitive data. Contact us for more information.

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October 2022 Questions and Answers

QUESTION:

The IRS fined me for making a late tax payment. Can I get them to waive the penalty?

ANSWER:

The IRS may provide relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement policy.

You may qualify for a reduction of your penalty for failing to pay taxes on time if the following are true:

  • You didn’t previously have to file a return, or you have no penalties for the three tax years before the tax year in which you received a penalty.
  • You filed all required returns or requested an extension of time to file later.
  • You have paid, or arranged to pay, any tax due.
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A Bear Market, a Bull Market

A BEAR MARKET

WHAT IS IT?
When a market index (like the S&P 500) falls 20% or more from its peak.

HOW OFTEN?
On average, a bear market occurs every 56 months.

HOW LONG?
On average, a bear market lasts 9.6 months.

A BULL MARKET

WHAT IS IT?
When the market has risen 20% or more above its near-term lows.

HOW OFTEN?
Bull markets have occurred for 78% of the past 91 years.

HOW LONG?
The average length of a bull market is 3.8 years with the longest being the 11-year run from 2009 to 2020.

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Maximize Your FSA

With the end of the year approaching, review your health care flexible spending account (FSA) to ensure you get the most out of it.

ROLLING OVER

Check to see if it allows money in your account to be rolled over and used in 2023. Some plans may allow a limited amount, usually no more than $500, to roll over. In comparison, some allow a short grace period of a month or two to use any unspent funds. But some plans have a “use it by December 31 or lose it” clause.

If you’re unsure, ask your human resources department because any money remaining in your account at the end of the designated period is forfeited to your employer.

QUALIFICATIONS

FSA funds can be used for a variety of qualified medical expenses. This includes over-the-counter medication and first-aid supplies. Dental procedures and eye exams are also covered. But remember that you can’t use FSA money for cosmetic procedures, health clubs fees, or prepayment for medical services you’ll receive next year.

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Small Business Loans

Take the guesswork out of securing a business loan. Whether it’s to fund expansion or purchase equipment, being prepared can speed up the process.

CHECK YOUR SCORES

Unless you own an established company, lenders will check your personal credit score when making business lending decisions. An individual score greater than 700 increases the odds that you will be approved. Business credit scores generally range from 0 to 100. So, the higher, the better.

HAVE A PLAN

Prepare a business plan because lenders will ask what you will do with the loan proceeds to increase your company’s profits. Explain your business strategy and include current and historical financial statements that contain a balance sheet and cash flow statement.

OFFERING SECURITY

Depending on the size of the loan you’re seeking, the lender may ask for collateral or a personal guarantee. The collateral could be equipment, receivables, real estate, or other businesses you own. And the personal guarantee states that you will pay the loan if the company doesn’t.

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October 2022 Client Profile

Katherine’s parents are 80 years old, and she’s taking on more and more caretaking duties for them. Besides looking after their physical well-being, she’s becoming more involved in managing their financial affairs. What are some things she should pay attention to?

If her parents do not yet have an estate plan, or at minimum a will and powers of attorney (financial and healthcare), Katherine needs to help them get this done. Assuming they designate Katherine as power of attorney, she’ll then be able make decisions on their behalf should they become incapacitated.

Katherine should also ask them to list their financial information and contacts. The list should include all accounts and account numbers, the usernames, passwords, and the location of all important documents, including tax filings. Don’t forget to include their Medicare, Social Security, and driver’s license numbers. Also, she needs to know how insurance premiums and other bills are paid.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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Maintaining Profits During a Bear Market

How we prepare our businesses for another potential bear market can mean the difference between thriving or struggling. Let’s revisit some keys to maintaining a financially viable company when the economy is slowing.

SAFEGUARD CASH RESERVE

Have a contingency plan to maintain cash reserves. You may aim to save 10% of your business cash in a high-yield savings account for unforeseen cash crunches. This way, you can avoid relying on lines of credit from your bank with high interest rates.

BACKUP PLANS

Have backup plans in case a critical supplier goes offline, faces unexpected delays, or increases prices excessively, which would impact your profits. Securing secondary options for critical supply chain components is playing it smart.

EXPANSION LIMITS

Although you may have plans to expand your product or service offerings or increase your geographic market reach, consider whether the return on investment will warrant the capital needed to make the growth a success. It may make sense to move forward or to wait out the economic slowdown. Moving too fast right now could over-extend your operation and unforeseen circumstances may catch you off guard. Keep your eye on outside factors that are out of your control (inflation, unforeseen lockdowns, shipping delays, unexpected rising costs, cooling market sentiment, etc.).

RAISE PRICES

It might sound counter-intuitive to raise your prices in a slowing economy, but you’ll need to fight inflation and cover the increasing costs of goods sold that are shrinking your gross margins.

Consider bundling products together to help justify a price increase in your customers’ eyes. Optimizing your average order value will raise transaction amounts.

CUT BACK

Be sure to cut excess expenses. That might mean targeting your marketing to your top-performing channels and tabling the rest for the foreseeable future.

Perhaps you’ll need to manage your business with fewer of the employee perks, like free lunches and keep tabs on travel, meetings, etc.

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Year-End Bonuses and Retirement Accounts

As the fourth quarter of 2022 is upon us, you may consider providing annual bonus payouts to your employees. It’s a great way to thank them for their hard work.

Once you settle on the bonus amounts, consider notifying each employee before you make the payments to provide them with a choice as to how they prefer to receive the funds. They could choose to take it as regular income or invest it in their retirement account.

If your company already has a 401(k) plan, depositing their year-end bonus will function like any other payroll deductions you make on their behalf.

If your employee has already maxed out their 401(k) contributions for the year, you may be able to send their bonus to their IRA.

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Save Taxes on Retirement Plan Withdrawals

Tapping your retirement accounts before age 59½ usually comes with a 10% early distribution penalty, in addition to any income tax that’s due. But if you must make an early withdrawal, the IRS allows a few exceptions from the penalty.

MEDICAL EXPENSES

If you have large medical expenses that your health insurance doesn’t cover, you can withdraw money from a 401(k) plan or traditional IRA to pay these bills. However, these medical costs must be greater than 10% of your adjusted gross income to avoid the 10% penalty.

Also, you can take withdrawals from a traditional IRA to cover health insurance premiums paid while unemployed. There are several conditions that need to be met to avoid the 10% penalty in this situation, so speak with your tax professional beforehand.

DISABILITY

Becoming disabled and unable to work means you may be able to tap your tax-deferred retirement accounts without the 10% penalty to provide income that supplements your Social Security Disability or Supplemental Security Income benefits. You’ll need your physician to document and substantiate your disability to avoid the penalty.

HOMEBUYERS

If you are buying or building your first home, you can withdraw up to $10,000 — if you’re single, or $20,000 — if you’re married and both have a traditional IRA, without paying the 10% penalty.

HIGHER EDUCATION

Pulling contributions out of a Roth IRA to pay for higher education expenses for you or your dependents is always penalty-free. But withdrawal of Roth IRA earnings will be subject to the penalty if you don’t meet the exception requirements.

AVOID WITHDRAWALS

Being fully prepared for retirement requires financial planning and leveraging tax savings and the time value of money. Consider other cash sources like taxable brokerage accounts.