Overview

Each year the federal tax code and state tax rules evolve through legislation, IRS guidance, court rulings, and agency enforcement priorities. For small businesses, a few categories of change tend to matter most because they directly affect cash flow and compliance: depreciation and expensing rules, payroll credits and reporting, digital-payments and 1099 reporting, energy and investment tax incentives, and state-level adjustments. Below are the specific items to monitor this year and practical steps you can take.

What to watch now

  • Bonus depreciation and Section 179 expensing

  • The 100% bonus-depreciation era created big first-year deductions but the bonus depreciation percentage phases down under current law (scheduled step-downs after 2022). That means the immediate tax benefit for new equipment purchases is smaller in later years—plan the timing of capital purchases and check current IRS guidance on depreciation (see IRS: Depreciation) (https://www.irs.gov/businesses/small-businesses-self-employed/depreciation).

  • Research & development (R&D) expense treatment

  • The tax treatment of R&D costs changed recently: many businesses must capitalize and amortize certain research expenditures rather than deducting them all in the year paid. Confirm treatment for your business with your tax advisor and see IRS guidance on R&D (Section 174/Pub. 535).

  • Payroll credits, including legacy Employee Retention Credit (ERC) issues

  • While ERC program rules have changed over time and the IRS has warned about fraudulent promoter schemes, many eligible employers still file amended returns to claim retroactive credits. If you think you qualify, use careful documentation and follow IRS procedures for filing or amending payroll returns (IRS ERC guidance). Internal resources: Employee Retention Credit (https://finhelp.io/glossary/employee-retention-credit/) and Amending Returns for New Tax Credits Claimed After the Deadline (https://finhelp.io/glossary/amending-returns-for-new-tax-credits-claimed-after-the-deadline/).

  • Payment reporting and Form 1099-K reconciliation

  • Rules for reporting payment-card and third-party network transactions have changed in recent years. Payment processors and platforms report gross receipts on Form 1099‑K; your books may report net receipts. Reconcile those differences and follow the latest IRS instructions (https://www.irs.gov/businesses/small-businesses-self-employed/payment-card-and-third-party-network-transactions-form-1099-k).

  • Energy, clean-technology, and investment tax credits

  • Federal credits introduced or expanded by recent legislation (for example, clean-energy and business-investment credits) create opportunities to reduce tax bills or offset equipment costs. Many of these are also paired with state-level incentives—check both federal IRS credit pages and your state economic-development sites.

  • State tax changes and SALT-related updates

  • States regularly change credits, nexus rules, and conformity to federal law. If you operate in multiple states or have remote employees, track state guidance and potential decoupling from federal provisions.

Practical steps for small business owners

  1. Design a 90‑day tax-watch routine
  • Review IRS news releases and your professional tax software’s update notes monthly. Bookmark IRS business pages and the SBA tax resources.
  1. Reconcile and retain documentation
  • Keep receipts, contracts, payroll records and proof of eligibility for credits. Strong documentation is required for ERC and other credits—and it’s crucial if you amend returns. See our Document Retention Policy for audit-ready recordkeeping (https://finhelp.io/glossary/document-retention-policy/).
  1. Time purchases and payables deliberately
  • When major changes are announced (e.g., depreciation phase-downs or new credits), work with your CPA to time equipment purchases, payroll, and elections to maximize near-term benefits and cash flow.
  1. Verify third-party reports (1099‑K, vendor 1099s)
  • Reconcile payment-processor reports to your bank deposits and accounting records before filing. Misreported gross receipts are a common source of IRS notices.
  1. Use a trusted tax professional and quality software
  • Tax planning is year-round. A CPA or enrolled agent who follows small-business issues can spot opportunities, help with amended claims, and reduce audit risk.

Red flags and common mistakes

  • Relying on outdated summaries: tax details change quickly—don’t rely on old templates for depreciation or payroll-credit filings.
  • Chasing retroactive credits through aggressive promoters: the IRS has flagged high-risk promoters offering to claim large ERC refunds without adequate documentation.
  • Poor documentation: missing payroll or eligibility records is the leading reason amended-credit claims are denied.

Checklist (quick)

  • Subscribe to IRS business updates and your state tax authority alerts.
  • Reconcile 1099‑K and other third‑party reports before filing.
  • Review capital purchase plans against current bonus depreciation and Section 179 rules.
  • Confirm eligibility and paperwork before claiming or amending for payroll credits.
  • Keep three to seven years of tax and supporting records, depending on your filings.

Authoritative sources and further reading

Professional disclaimer

This article is educational and does not replace personalized tax advice. Tax law and IRS guidance change frequently; consult a CPA or enrolled agent before making decisions that affect tax liability.

Internal resources

In my practice, proactive quarterly reviews of expected legislation and a simple documentation checklist cut audit exposure and preserved credits worth thousands to midsize clients. Start small: reconcile your payment processors and schedule a tax check-in with your advisor this quarter.