NEW YORK (AP) — Year-end tax planning, something that should be part of a small business owner’s annual routine, is particularly important now because of the tax law enacted nearly a year ago. The IRS…
NEW YORK (AP) — Year-end tax planning, something that should be part of a small business owner’s annual routine, is particularly important now because of the tax law enacted nearly a year ago. The IRS has cleared up some of the mystery around sections of the law that affected small businesses, but owners need to crunch numbers to see how much of a break they’re likely to get.
Some tips about tax planning:
— Don’t do it alone — schedule an appointment with an accountant, tax attorney or enrolled agent.
— As in any tax year, consider whether you should defer income until next year or move up planned 2019 expenses into this year. This means doing long-term planning. Owners should be thinking three to five years ahead, says Manuel Pravia, an accountant with MBAF in Miami.
— If you buy equipment and deduct and/or depreciate the cost, it must be up and running — what the IRS calls “placed in service” — by Dec. 31.
— Owners who want to make retirement plan contributions for this year have until the due date of their tax returns, including extensions. That could be as late as next October.
— For sole proprietors, partners and owners of S corporations, in trying to determine if you can claim a 20 percent deduction of your qualified business income, remember that the tax break is based on all your taxable income. That includes your business income and earnings from work you might do separate from your company. A spouse’s income goes into the computations. The amount you might be able to claim is affected by factors including the compensation you pay employees.
— Owners tempted by a big drop in the corporate tax rate and considering converting their companies to what are known as C corporations should remember there’s double taxation, says Julian Fortuna, a tax attorney with Taylor English in Atlanta. The company is taxed, and owners are taxed when they receive dividends.
— Businesses can no longer deduct entertainment expenses like tickets to events or the cost of activities like golf. But food bought during an event — like hot dogs at a baseball game — is 50 percent deductible. So are meals.
— You can get more information at the IRS website, www.irs.gov .
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