Skimming the headlines about the latest tax reform was a bit confusing because of the varying opinions on the changes that were passed in Washington. How will these new tax laws impact your business? It is essential that you talk to an industry expert so that you are informed about the changes that need to take place for your tax strategy this year.
The rules from “The Tax Cuts and Jobs Act” went into effect on January 1, 2018. Over 1100 pages were written to outline the bill, making it hard for business owners to understand the details. Here is an overview of what you need to know:
Flat Tax Rate for Corporations
If your business is structured as a C Corporation, it is probably good news for your tax filing. There is no longer a tax bracket for these businesses, so everyone pays a flat rate regardless of the taxable income level. According to the new law, C Corporations now have a flat rate of 21% on all taxable income. This change will save you money if your taxable income is over $90,385. But, you will pay more than before if your income is less than that.
On the other hand, pass-through entities, such as sole-proprietors, partnerships, LLCs, or S Corporations, weren’t affected by these changes. These companies have a deduction based on 20% of the income from the entity. To offer a simple example, if your income is $100,000 this year, then the deduction would be $20,000.
Filing Dates in 2018
The filing for 2017 taxes started January 29, 2017, with the nation’s tax deadline being April 17, 2018. For businesses, following are the tax deadlines for 2017 filings:
Entity Type Tax Deadline Due Date
Form 1065 – Partnerships and Form 1120S – S Corporations March 15, 2018
Partnerships and S Corporations with Extensions September 17, 2018
Form 1120 – C Corporations and Form 1040 – Individuals April 17, 2018
C Corporations and Individuals with Extensions October 15, 2018
Form 990 – Exempt Organizations May 15, 2018
Exempt Organizations with Extensions November 15, 2018
Don’t forget to mark your calendar for estimated quarterly payments as well. Tax estimate payments are due April 15th, June 15th, September 15th, December 17th. You can view the breakdown of these dates on the IRS website.
Understand the Law to Maximize Tax Breaks
As a business owner, you don’t have time to sift through the paperwork so that you can understand how the new tax laws apply to your company. Instead of trying to decipher the law, it is better for you to focus on the management of your business. Let an accounting and financial professional manage your tax strategy so that you can maximize tax breaks for the year.
Depending on your income trends, it might make sense for you to restructure the company this year. The best solution is to hire an outsourced CFO who can evaluate your current business practices, assess future trends, and provide recommendations to improve your tax strategy in 2018. Right now is the time to make these changes, so that you can implement the benefits of this plan all year long.
Do you need help with your business structure or tax strategy? Contact us to learn more about the way an outsourced CFO can help.