In last month’s article, I highlighted the changes to pass-through businesses posed by the new tax bill. Today, let’s look at deductions that affect all businesses, but specifically medium to large size businesses.

When I was growing up, my mom had a saying: “You can choose to change or change will choose you.” The latter can be applied to 2018 and the new tax rates for small businesses. Seeing as it’s the beginning of the year and most people are still open to changing things in their lives, let’s look at this change and what small business owners can do for their tax situation.

During the holiday season, everyone can understand the idea of the one big gift: the hot new toy, the new game or gaming system, a car with a giant red bow, etc. While those gifts are nice, smaller gifts (usually tucked into a stocking) often give a type of enjoyment that is special, recurring in nature, or even a tradition. These gifts shouldn’t be overlooked in pursuit of the big gift.

When it comes to businesses and taxes, the same holds true. Businesses typically look for the biggest tax deductions first, and don’t spend much time thinking about the smaller ones. The trick is to look at all the options (including the smaller ones), and plan out the resources that should be allocated to each.

Halloween tricks may be over, but real tax surprises could still occur as late as next October for things that happen in 2017. And when it comes to filing and paying your taxes, surprises are never fun. Recently, I was contacted by a potential new client because the tax liability on the proposed filing of the 2016 tax return was a little north of $50,000. Needless to say, this was not the Halloween treat they had hoped for.

What is a widget?

The response from the professor in a classic 80’s movie: “It’s a fictional product. It doesn’t matter”, shows the difference between the theory of business and the real world. In theory, all manufacturing companies would track their product income and expenses by class and take all the deductions that are available to them. However, that usually doesn’t happen because the business owner is unaware.

 Cryptocurrency, such as Bitcoin, is an electronic currency used to pay for goods and services. It can be bought, sold, or created (called mining). There are websites that allow you to purchase it directly or invest in funds that purchase it. Tracking the currency can be a challenge because fractions of the coins can be sold at a time, and there can be many transactions over the course of a day. Income recognition can also be a challenge. That’s why the IRS has issued guidance on how general tax principles apply to cryptocurrency. Let’s look at the two main types of transactions that are applicable to most business owners: investing in and accepting of payment.