The first step, of course, is to gather and sort the papers, plug in whatever numbers are required, and get your business' 2017 data to your tax preparer.
Then, says Greg Dowell, there will be time to strategize with your CPA (or spouse, enrolled agent or whoever prepares your taxes) about the new tax law.
Dowell is managing partner of Dowell Group LLP, a Palatine-based CPA and advisory firm.
There are, Dowell says, "some juicy pieces for small businesses" in the tax legislation.
There is, for example, a bonus depreciation for property purchased after Sept. 27, 2017, and, although it is an open question at this writing, homeowners who prepaid their 2018 real estate taxes may be able to deduct them on their 2017 taxes.
But, as we close out January, there's very little business owners can do to affect their 2017 taxes. However, there may be quite a bit to do during this new year that will affect the tax bill you pay a year from now.
Interpretation and guidance pertaining to the 2018 tax law, best known as the Tax Cuts and Jobs Act, are skimpy -- mostly because taxpayers and their advisors have concentrated on 2017 tax issues first. But Dowell -- who, so you know, is our tax advisor -- is correct when he talks about juicy pieces for small business in the new legislation.
• The corporate tax rate in 2018 will be 21 percent, although as a practical matter that's mostly for bigger businesses. The law establishes a 20 percent deduction on pass-through income -- i.e., the profit that an S-Corporation makes that is passed through to owners and taxed at each owner's individual rate.
Now that pass-through income can be reduced by 20 percent, so that (using a Dowell example) a married sole proprietor with a net taxable income of $200,000 could claim the 20 percent deduction and pay taxes not on $200,000 but, after the deduction, on $160,000.
There are income limits for both individual and joint filers, so talk to your tax advisor.
• The Section 179 deduction cap increases to $1 million. Under Section 179, qualifying purchases can be expensed in the year purchased.
All the news isn't good: Net operating loss carryback provisions have been eliminated. So has the domestic production activities deduction.
There is plenty of information concerning the new tax law floating about, which prompts two cautions:
• Many of us search the Internet for the latest information, but web information isn't always up-to-date. Carefully check the dates of the material you're reading.
• If you're comfortable with your current tax professional, stick with that advisor. As Dowell said mid-month, "Tax professionals still are scrambling to get their heads around the new tax act. We'll need more guidance (from the IRS)."
The good news is that there is time for some serious tax planning. This is the year that tax planning will be more important than ever.
• © 2018 Kendall Communications Inc. Follow Jim Kendall on LinkedIn and Twitter. Write him at Jim@kendallcom.com. Read Jim's Business Owners' Blog at www.kendallcom.com.