Tax planning is a juggling act for business owners. You must keep your eye on your company’s income and expenses and applicable tax breaks, which is particularly challenging this year in light of Tax Cuts and Jobs Act (TCJA) changes. Our Professional Services Group is comprised of audit, tax and management consulting professionals who understand the distinct challenges that professional service organizations face. Our experienced team provides practical business solutions and strategies that enable these organizations to ultimately achieve or exceed their financial goals.
The TCJA will help reduce the 2018 tax burdens of many businesses and their owners. For C corporations, it replaces graduated rates ranging from 15% to 35% with a flat rate of 21%. For all entity types, the TCJA enhances some tax breaks but reduces or eliminates others. For example, it increases depreciation deductions but eliminates the Section 199 “manufacturers’” deduction and more tightly limits breaks available for employee meals and transportation.
Contact Us For More Details on Ways the TCJA Will Impact Your Business.Another significant TCJA change affecting business owners is the new limit on deductions for pass-through business losses. For tax years beginning in 2018–2025, you can’t deduct an “excess business loss” in the current year. An excess business business deductions for the tax year over the sum of:
The excess business loss is carried over to the following tax year and can be deducted under the rules for net operating loss carry-forwards.
If most of your money is tied up in your business, retirement can be a challenge. So if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year. If you might be subject to the 3.8% NIIT, this may be particularly beneficial because retirement plan contributions can reduce your MAGI and thus help you reduce or avoid the NIIT. Keep in mind that, if you have employees, they generally must be allowed to participate in the plan, provided they work enough hours and meet other qualification requirements. Contact us for more information on profit-sharing, SEP and defined-benefit plans.
Whether you’re selling your business as part of an exit strategy or acquiring another company to help grow your business, the tax consequences can have a major impact on the transaction’s success or failure. Consider installment sales, for example. A taxable sale might be structured as an installment sale if the buyer lacks sufficient cash or pays a contingent amount based on the business’s performance.
An exit strategy is a plan for passing on responsibility for running the company, transferring ownership and extracting your money from the business. This requires planning well in advance of the transition. Here are the most common exit options:
