The tax season is very near and every business must have started gathering documents, checking their financial mark sheet, analyzing their books, checking reconciliation, but along with all these necessary measures, all the businesses also need to know the new tax rules otherwise they will have to pay the price for it.
Tax laws keep going through regular modification and that’s why you should keep an eye on the new laws, deduction, and deadlines in order to make the tax season seamless. You should also not go with the traditional tax filing process as it is unsecure, time taking, costly and not accurate. Instead, you can use the cloud accounting solution which will give flexibility to you and your tax expert as well.
So, in this blog post, we will be looking at some of the new tax rules which have been outlined by the IRS especially for businesses in 2019. Without knowing these new tax rules, either you won’t be able to garner the benefits of the tax season or you will be paying extra money or penalty which will be totally unnecessary for your budget.
Deduction for small businesses
One of the most important questions which is arising in the mind of small business owners is that as an owner of sole proprietorship, partnerships, can they file new deductions aimed at small business owners?
The current law gives the leverage to owners of such businesses to get a deduction of 20 percent, which will fall under the bracket of qualified business income. But there is also an income threshold according to the IRS guideline which is as follows:-
Deduction for category trade or business
You should also know that the calculation for such deduction is quite tricky and there is also wrinkle for owners whose business falls under the category of service trade or business like accountants and attorneys. Such individuals will not get the deduction if their taxable income is more than $207,500 for individual and $415,000 for married couples
Compensation and owner of multiple companies
The deduction amount may also be affected by the compensation which the owner pay to their employees. If you are an owner of multiple companies then you should be very much specific with which income source qualifies under the new rules of deduction.
Corporate tax rate
The new tax law also provides big deductions in the case of corporate tax rate, which is 21 percent to 35 percent. Now, because of the new tax law, many owners are now asking tax pros that whether they should change their sole proprietorship, partnership to C Corporation or not so that they can take advantage of the new lower rate. But the ideal way to move forward with your tax filing is to avoid such changes. The concept of C Corporation, which is used by some of the biggest companies are taxed under their income, shareholders which also includes some small business owners.
But there are some businesses which can benefit from the concept of C Corporation like the owner of a company who wishes to take make his company public while on the other hand, if an owner doesn’t wish to pay the dividend shouldn’t be worried about taxation.
Money spent on food
It was very much clear that the money spent on entertaining (golf tickets, movies, etc.) the employees by the company will not fall under the deduction, but the last issued rules by IRS regarding this matter cleared everything and it states that the money spent on taking employees out on a lunch or bringing food for staffs will be deductible by 50 percent.
What you will need to do going through a seamless tax season?
The tax season is expected to start from 29th January and if you want to have smooth tax season for your firm then you should be well aware about the new tax laws and you should also follow the tips mentioned in this article like the use of cloud based tax software, using e-filing and much more.