As you should be aware of by now, the Tax Cuts and Jobs Act (TCJA) was passed in December 2017. The intent was to simplify the tax code. You may have heard that you will be able to file your taxes on a postcard. While it may have been simplified, many tax professionals don’t believe it will be as simple as advertised because of the forms that may be required to enter data onto the IRS Form 1040 postcard.
Because it may not be as simple as advertised, tax planning should be more of a priority than ever before, and it is not just for business owners. Not only did the tax return change, but the tax withholding tables also changed. Individuals should be evaluating withholdings from your paychecks to make sure you are withholding the proper amount. There aren’t too many things in life that are more devastating to a family budget than being hit with a substantial tax bill in the beginning of the year and right after the holidays. There have been changes made to the tax code that may affect deductions you have taken in the past that may not be available now or in the future.
Small businesses should be aware that the laws have changed for all the entities. Certain pass through entities may now be eligible for the new Section 199A deduction that was added to the tax code. It could potentially be a very valuable deduction to business owners, but it is very complicated and has many nuances built into it. Choosing the right business entity will also certainly need to be evaluated with the new laws.
Tax Planning should be a vital part of your business strategy and individual budget. If not done correctly, it could end up being very costly during tax season. The last half of the year is an important time of year to implement your planning strategies. Business owners should be making the appointments with your tax professional to find out how to legally reduce your tax bill to the lowest possible amount. There are many legal strategies available, and it is possible to reduce your tax bill to $1.00.