The Tax Cuts and Jobs Act (TCJA), guidelines and tax expectations have become a little confusing lately.
To assist small businesses save some money and avoid accidental penalties in the wake of our current loophole-filled tax law, here are some tax-saving tips to start employing within your small business today – courtesy of the National Association of Enrolled Agents.
- Restructure Your Business
For owners of qualifying pass-through businesses such as sole proprietors, S corporations, partnerships, or LLC and LLP members, the TCJA offers a valuable 20% tax deduction.
Under the current law, however, to get this deduction with the maximum tax savings, business owners may be required to change their current tax structure. For example, sole proprietors could save more in tax dollars by making the switch on paper to an S corporation instead.
It’s a confusing law and full of vague terminology that as of yet lacks IRS clarification, but if you’re a small business that could qualify for the 20% deduction, be sure to meet with your tax professional to discuss your options.
2) Watch for Deduction Changes
Small businesses should be wary of continuing old habits in how they do business each year, as the many changes in deductibles could come back to bite them. For example, expenses for meals given to employees on work premises have dropped from the previous 100% deduction to 50% under the new tax law, while entertainment write-offs for client outings to baseball games and the like are no longer deductible at all as of 2018.
To prevent unanticipated costs, make sure to check with your tax professional and the current tax law at the beginning and end of each tax year.
3) Remember Your Quarterly Estimates
For sole proprietors and partnerships, paying their yearly tax bill in advance through quarterly estimates is a commonly missed requirement. However, failure to do so in a timely manner can result in a build-up of fees and payments at the year’s end that could have been avoided and broken up throughout the year.
If you’re a small business required to pay quarterly estimates, mark your calendars for remaining due dates of September and January, while keeping accurate records to make calculating your estimates easy.
4) Stay on Top of Your Bookkeeping
This last tip could be arguably the most crucial. To achieve any tax savings, one must first make the right calculations and understand their tax benefit options, but you can’t do either without proper records and bookkeeping habits – not to mention the possibility of penalties for inaccurate tax returns.
For every small business, investing in a good bookkeeper or bookkeeping software is crucial for the protection of its growth and money – and often one that pays for itself.
Want more help achieving maximum tax savings for your business? Call us at (310)534-5577, or email [email protected] to see what we can do for you! This new Tax Cuts and Jobs Act may be complicated, but you can trust that we’ll work with you and your CPA to help you get all the deductions you deserve
