President Donald Trump recently signed the Tax Cuts and Jobs Act tax reform bill, which has been touted as the most extensive rewrite of the tax code in three decades. The big news for businesses? A maximum corporate tax cut from 35 to 21 percent and a 20-percent deduction for all pass-through businesses.
Take note: Certified public accountants (CPAs), enrolled agents (EAs), attorneys, and business owners: You have your work cut out for you! Not only is the scramble on to file 2017 federal business returns, but you must also consider how your 2018 budget stacks up in light of this reform.
And recent changes will particularly affect your preparation of proprietorship and business entity returns, notes taxation expert Vicki L. Mulak in her Eli Financial audio conference, “Federal Business Tax Update.” The session, specifically tailored for tax professionals preparing 2017 federal business returns, also covers tangible property regulations and key business provisions (especially those scheduled to phase-out or expire) that will affect business returns.
Already Set Your Budget? Take another Look
The new year is in full swing, and most corporations no doubt already have a solid business plan in place. As you reconsider your budget, revenue projections, investment strategies, and both long- and short-term goals in light of this reform, keep these tips in mind:
- Revisit your business plan. Passed with hopes to spur economic growth, the Tax Cuts and Jobs Act should translate to higher profitability for most businesses in 2018. Take this time in the coming months to revisit your corporate budget and business plan. As you recalculate your revenue projections, consider if this extra padding should be used to hire new employees, expand your business, or purchase new equipment. Don’t see this as a setback! According to Tim Berry on entrepreneur.com, a good business plan is never done, and you should always be updating it. That mantra will certainly hold true for many corporations ringing in this new year with an already changing forecast.
- Gear up for new withholdings. During the coming months your payroll division will need to incorporate the new 2018 withholdings into employee paychecks. A statement released by the IRS reads, “The IRS is working to develop withholding guidance to implement the tax reform bill signed into law on December 22. We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February.”
- Dig out 2017 equipment receipts! If you purchased business equipment last year between September 27 and December 31, you may benefit on your 2017 tax return. A new provision in the tax reform allows for full and immediate expensing for equipment up to $1 million for five years before this provision phases out.
- Consider a small business restructure. According to Fidelity.com, “If you own a small business, you may want to reconsider how you structure your income and the form of your enterprise. Depending on the size and particulars of your business, you may want to consider the benefits of incorporation or the restructuring of pass-through organizations.” Of course, it’s wise to consult your tax advisor before making any major changes.
Start Planning Now for 2018 Taxes
As you gear up for the 2018 tax filing season, arm yourself with the federal regulation knowledge you need to properly—and confidently—prepare your 2017 business returns. And note: It’s not too early to begin your tax planning for 2018 as well.
