Time to tackle tax law changes for small businesses

by | Sep 12, 2018

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If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...

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Small business finances already are challenging—then, every year the federal government piles on the headaches with tons of changes in tax law for them to wrestle with. The current administration recently ramped the shifts up, when they voted in the most significant tax law overhaul since Ronald Reagan dwelled in the White House. Some of these changes are good, others bad—but if you don’t familiarize yourself with the shifts in tax code, things at your small business could get ugly.

Unfortunately, even tax wizards (and we’re guessing you’re not among that number) can find keeping up with changes in US taxes…well, taxing. Following are a few of the highlights (or lowlights, if you prefer)—for a deeper dive, it’s a good idea to check with your accountant, and have a chat with a small business finances like Daliah at My Small Business Pro (you can reach out to her here for advice).

Delightful deduction news

Not all of the tax-law changes affecting small business finances are bad. This one actually is pretty good—the tax burden borne by business owners, partners and shareholders at S-corporations, LLCs and partnerships—folks who pay their share of a company’s taxes via their respective individual tax returns—has been lowered, thanks to an automatic 20% deduction. Now, here’s the tricky part: that 20% deduction only applies to certain types of organizations—here’s one case where it’s a good idea to put in a call to MSBP and/or your accountant to check and see if you’re one of the fortunate souls who can reap the benefits of this new deduction.

The entertainment benefit is over

For companies that previously treated clients to Cubs games, concerts and other enjoyable events, the fun might be over—the Tax Cuts and Jobs Act (TCJA) puts an end to the deduction of such entertainment expenses from your returns. Fortunately, meals can be deducted at 50%, but even then there may be exceptions. What’s more, tax experts expect the IRS will be scrutinizing such deductions more than ever before.

Equipment investment improvements

If you’ve been hesitating to purchase new equipment for your small business, now might be the time to plunk down the money for that gear. The new tax act enables small business professionals to write off up to 100% of the cost of new or used equipment purchased through the end of 2022. A caveat to watch out for: the bonus depreciation percentage is being phased down, from 80% for property put into play during calendar 2023, to 20% for property put in service during 2026.

Flat corporate tax rate

Before the latest wave of tax tweaks, C corporations paid taxes at a rate ranging from 15% to 35%. Now, all C corporations are subject to a single, flat tax rate of 21%. This is great news for companies that stood at the 35% rate before the changes came about—and not so great for companies that enjoyed the lower 15% rate.

No more harassment-related writeoffs

In a bit of legislation crafted by Senator Bob Menendez (D-NJ), misbehavior caught up in the wide net of the #MeToo movement no longer can be deducted from taxes. This means companies cannot write off any settlements or legal feels related to sexual harassment if payments are subject to non-disclosure agreements. While there’s still some questions (even among tax experts) about whom this law affects, there’s no question that this new measure empowers women in the workplace. That’s something everyone at My Small Business Pro celebrates.

This list of changes is by no means complete—if you’d like to chat about what other shifts potentially impact you and your small business, reach out to My Small Business Pro.

Traditional forecasting can be a losing endeavor  

If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...

Understanding Financial Accountability  

"I'm not here to give you the good news."  I say that phrase to clients much more often than you might think. Because I ultimately want to celebrate their business's success with them, I’m there to tell them the actual state of their company's finances and guide...

Trust and Commitment in a Remote Team 

A couple of months ago, I made my first overseas trek since 2017 – not for vacation – but to meet with the rest of the Fritz Financial Solutions team of accountants in the Philippines. It was important to me to show these women the time and attention needed to...

Client Spotlight: Andrea Freidman 

As a business owner, one of the most significant challenges to overcome is work-life balance. This dilemma has only been exacerbated over the last several years and forced many "traditional" industries, such as the legal profession, to change their ways. Long before...

MEET THE TEAM: Joy mercado, Staff Accountant 

Joy Mercado joined Fritz Financial Solutions just over six months ago after completing an accelerator program with TOA Global, our offshore recruiting partner specializing in the accounting industry. Joy has quickly become an invaluable team member doing highly...

Client Spotlight: Isaac Crawford  

Isaac Crawford is a ray of sunshine who went after his dreams and came out on top when he started his own hair salon. He has been in the hair industry for almost 15 years and has serviced hundreds of clients in Chicago. An inspiration to entrepreneurs, we are excited...

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