The last quarter of the year is upon us. This makes it the perfect time to discuss changes to tax obligations under the Tax Cut and Jobs Creation Act signed at the end of 2017. There are changes that directly address business owners and freelancers.
It should also be noted that those businesses who pay taxes quarterly will need to offer (or are already doing so) a best guess for the correct amount of taxes to be paid. More information about pay as you go taxes is located here.
The good news
Bright spots include the following:
- More deductions for businesses: Sole proprietors, partners, trusts and S corporations will now be able to deduct 20 percent of their business income. For more information, click here.
- Depreciation of assets: Businesses will be able to depreciate assets in the same year they are put in service. The 100-percent depreciation will apply to assets with a recovery of less than 20 years. Other assets may also apply, such as computers, furniture and equipment.
- Bike commuters reimbursed: Bike commuters’ expenses for the next seven years will be reimbursed, but employers must include it in the employee’s wages.
The not so good news
Some will not be so happy about the following:
- Meals and entertainment deductions are cut: Deductions for entertainment and recreation is eliminated; however, 50-percent deductions apply to business meals if employees, clients, consultants or customers are present. Other conditions must be met as well.
- No transportation: No deductions for transportation expenses to and from work unless it is necessary for the employee’s safety, or it involves biking.
- Moving expenses not deductable: Moving expenses paid to an employee in 2018 are federally taxed. Those from previous years are not.
- New rules involving employee achievement awards: Special rules apply if the employee receives a tangible gift or the employer gives tangible property within limits. Tangible property does not include stocks, bonds, gift cards, cash, coupons, tickets, vacations, meals, lodging as well as similar equivalents.
Tax law attorneys can help
The state and federal government generally assumes the worst when people do not pay what the organizations deem as the correct amount of taxes. Suddenly, taxpayers face audits for making an error in this new and complicated process. Experienced tax law attorneys can help taxpayers fight back, reducing or removing fines involving payroll tax, sales tax and other types of taxes.