As the calendar turns to November, it’s important to take a look at what you’re winning and losing with the 2018 tax law changes. You may want to know what your situation will look like compared to 2017 using the 2018 tax changes. Some business owners feel like they are losing a lot, because that’s what they hear— from the news, media, their friends, and maybe even their family. However, they may not lose at all. In fact, by losing deductions, business owners may win.
Let’s look at a comparison. Our comparison is designed to determine what’s lost with the new tax law changes, using the same financial information for each year.
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.
As soon as Treasury Secretary Mnuchin revealed the Trump Administration’s plan for tax reform, my phone rang. It was my older brother, Steve, wanting to know my thoughts on the proposal to lower the corporate tax rate to 15% from as high as 39%.
He remembered that in the past, I had written an article that discussed how the U.S. had the highest corporate tax rate in the developed world. However, Steve had read that U.S. corporations have a much lower average tax rate than 39%. As such, he wanted to know why the rate should be lowered if the average corporation already pays a much lower effective rate.
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The great Yogi Berra has a famous saying: “It's like déjà vu all over again.”
On April 15th (Tuesday April 18th in 2017) the IRS is going to want the money that taxpayers owe them for 2016 taxes. In addition, they would like taxpayers to send their first installment of their 2017 taxes. This double whammy can leave taxpayers feeling like they are a weather man in a small Pennsylvania town in February.
There is a common phrase that will soon be uttered by clients in many CPA firms across this country:
“I have never filed an extension...” It’s often too quickly followed by, “…and I will not be filing one this year.”
So many people are afraid to ask for help when they actually need it. This holds true when it comes to taxes. Oftentimes, people will want to rush through their tax return to meet the April 15th deadline and avoid filing an extension. Rushing to finish any project is never advisable, especially when it comes to something as important as taxes. It’s ok to ask for more time, and it may even save you money.
The U.S. continues to have the highest corporate tax rate in the developed world. As such, companies domiciled within our borders are at a competitive disadvantage relative to corporations headquartered in other countries. Higher taxation means less money for expansion, factories, salaries and benefits. This has led many to use a legal process called a “tax inversion” to relocate their headquarters to lower tax nations.
Taxable entities organized in Texas or doing business in Texas are subject to a franchise tax or business tax. Even if your business does not owe taxes, it is required to file a Franchise Tax Report each year. You will be required to show that your business franchise taxes are current when you borrow money for your business, sell the business or terminate the business.