Before you ring in the New Year, make sure to take one more look at your financials to make sure you are taking advantage of all the changes made in the Trump tax plan. While you would rather be planning your holiday office party, spend a minute with your accountant. That party may actually be a right-off, as changes are ahead for a tax break you can take on meals and entertainment. This is the time of year we all wish that we had signed off on Steve Forbes’ flat tax. Just sign the postcard and mail it in. Oh well.
This has been a busy year for all taxpayers, as the Trump Tax Cuts and Jobs Act went into effect in January 2018. This is the first tax year in which business owners can take a 20 percent deduction on qualified business income, but the details are technical. Shave your tax bill by contributing to your retirement plan, but what are your limitations. As you may have surmised, this is the year to definitely need to see your CPA for help. “Don’t try to do this yourself,” said Cari Weston, CPA and director of tax practice and ethics at the American Institute of CPAs. “The taxes have changed a lot and you need to talk to someone before the end of the year.”
The 20 percent qualified business income deduction has spurred a burst of creative tax planning, as accountants weighed different methods to help entrepreneurs qualify. “If you’re self-employed, max out your SEP IRA,” said Lisa Greene-Lewis, a CPA with TurboTax. Generally, entrepreneurs with SEP IRAs can put away up to 25 percent of their net earnings from self-employment up to $55,000 for 2018 ($56,000 for 2019). According to a survey of small business owners by the NFIB, companies are thinking similar thoughts when it comes to taxing and spending.
Make sure you are aware of the possible tax breaks that you can take advantage of. Here are a couple to consider.
- Work Opportunity Credit. If you’ll be hiring employees for your business, hiring workers from certain target groups that typically have a hard time gaining employment may qualify you for this credit
- Disabled Access Credit. If you have a storefront or office that’s open to the public, you might be able to qualify for this credit if you incur expenses to provide access to your business for people with disabilities.
- Alternative Motor Vehicle Credit. This credit could reward you for driving green if your business purchases a new car, SUV or truck that runs by combining oxygen and hydrogen fuel to produce electricity.
Last but not least, be aware that self-employment often means making estimated income tax payments throughout the year if you expect to owe a $1,000 or more in taxes when you file your federal income tax return. Payments are generally quarterly and can be paid online, by phone or by mail. Underpaying your taxes throughout the year could result in a penalty when you file.