Preparing for Tax Season as a Business Owner

“There are only two people I fear:
God and the IRS.”

It’s tax season, business owners!

Please note this information is provided by a Miocoa contributor and should not be taken as advice. If you have any questions or concerns regarding things that are tax-related, it is recommended you consult with a Certified Public Accountant (CPA) or a tax advisor to avoid any penalties, fines and other repercussions.

We’ve made it passed the second projected government shutdown date (February 15, 2019) so it’s the best time to complete your taxes. For those business owners who have kept their receipts and maintained a paper trail of spending and expenditures, good job. For those that haven’t, let this be a reminder that you may not have to going forward.

There are a few changes for business owners this tax season.

The Tax Cuts and Jobs Act was signed in December 2017. This new law was intended to create a new structure for the individual taxable income. One huge benefit from this act is the repeal of the tax penalty caused by the Affordable Care Act. This means you’re no longer penalized for not having health care, however, this may not take effect until 2020. On average, the cost of this tax penalty was $695 in 2017.

But, what does this act mean for someone who is self-employed or a freelancer?

Pros:

Lower tax rates – Depending on your tax bracket, you may fall in one of seven new individual brackets ranging from a 10–37%.
Standard deduction increase – Although the itemized deductions have been eliminated, here are the standardized deductions effective for 2018 and beyond. $12,000 (single), $18,000 (head of household), $24,000 (married).
More money – You’re now eligible for a pass-through credit for being self-employed.

Cons:

Moving expenses can no longer count as a deduction; this rule will be an exception for those who serve in the military.
State and local taxes now have reduced deductions, which means you may receive less money for state and local.
There are a few tax provisions that will remain in place until Dec 31, 2025

If you would like to get more information on the Tax Cuts and Jobs Act; click here.