Monday June 17, 2019
Small Business TCJA Tax Changes
In IR-2018-2003, the IRS reminded small business owners that the Tax Cuts and Jobs Act (TCJA) includes many changes that may reduce or change their taxes. While there are approximately two months left in the calendar year, many small businesses may still benefit from making changes before December 31.
- Qualified Business Income Deduction - The 20% deduction for qualified business income (QBI) will be available for 2018 federal income tax returns. The Sec. 199A deduction is generally available to pass-through businesses. More information is available through the Sec. 199A frequently asked questions (FAQs) on www.IRS.gov. There are complex phaseout rules for business owners with higher-income levels.
- 100% Expensing - Most depreciable assets may be deducted if they are placed in service during 2018. The 100% depreciation deduction generally is applicable for machinery, equipment, computers, appliances and furniture with a recovery period of 20 years or less.
- Entertainment and Meals - Many of the prior deductions for business expenses related to entertainment, amusement or recreation were reduced or eliminated. There is still a 50% deduction for the cost of business meals if all IRS requirements are met and meals are provided to a current or potential customer, client, consultant or other business contact.
- Transportation - Most deductions for fringe benefits related to transportation or commuting have been eliminated. An exception may apply if the transportation expense is necessary for employee safety.
- Bicycle Commuting - Employers may deduct qualified bicycle commuting reimbursements. While this is a qualified business expense for the employer, the employee will report the reimbursement as wages.
- Moving Expenses - Most moving expenses in 2018 are now taxable income for the employee.
- Estimated Taxes - If a sole proprietor, partner or subchapter S corporation shareholder has substantial income, he or she may be required to make quarterly estimated tax payments. Taxpayers are excluded from estimated payments if they owe less than $1,000 in tax in 2018 or had no tax liability in 2017 (with some limitations). The IRS website has a "Pay As You Go" page and also Pub. 505, Tax Withholding and Estimated Tax. The website and the publication may help business owners determine whether they will need to pay estimated taxes.