How will the new tax laws affect businesses? With last year’s passage of the largest tax overhaul in decades, there will be some big changes in the 2018 tax season. The adoption of the Tax Cuts and Jobs Act will affect entrepreneurs, homeowners, parents, and many others. What do you need to know for your company?
Tax Changes Are Coming
While many of the provisions adopted by the Trump administration may remain open to interpretation as this year progresses, the following are some issues you should be aware of as a business owner:
- Owners of pass-through business entities may deduct up to 20 percent of their qualified business income. There are exceptions, of course, involving personal service companies and caps on deductions.
- The maximum corporate tax rate drops from 35 percent to 21 percent as an incentive to bring businesses back into the United States.
- S. corporations that do business on an international basis will no longer be taxed on income earned overseas. This territorial tax structure is meant to encourage export of U.S.-made goods.
- Withholding requirements from employee paychecks are changing this year as soon as the IRS decides how to implement the new laws. Standard tax deductions are doubling, personal exemptions are disappearing, and federal taxes on bonuses and commissions are rising.
Is Your Business Set up Correctly?
Your business may or may not realize some of the benefits purported by the new tax bill depending on the type of corporate entity you have. Some opponents of the tax changes also claim that the overhaul of the tax system will hurt small- and medium-sized businesses throughout the country.
Don’t wait until later this year to prepare. Some of the provisions may become effective within weeks of review and incorporation by the IRS, especially those regarding payroll taxes. Learn as much as you can early so that you are not surprised — or financially harmed — by sudden mandates.
A review of corporate structure by an attorney is an excellent way to find out how the new tax laws affect businesses. It’s beneficial to ensure compliance and in collaboration with your tax adviser, to obtain the benefits such tax overhaul may offer to your business. We hope that the above provides an insight for your business management. Please feel free to contact our firm if you have any questions.
PLEASE NOTE: The above information is being provided for general business information purposes only. We are not tax attorneys and do not provide legal advice on tax matters. Please consult your tax advisor for questions about how the new tax law affects businesses.
The New York Times, “If You Want to Know How the New Tax Code Affects You, Read This First,” Keith Collins and Ron Lieber, Dec. 28, 2017.
Business News Daily, “How Will the New Tax Law Impact Small Business?,” Matt D’Angelo, Dec. 20,2017.
Inc.com, “The Tax Bill Is Final. Here’s What U.S. Businesses Need to Know,” Zoë Henry, Dec. 20, 2017.
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