Tax Reform: Savings for Business Owners

Jun 4, 2018 | Blog

The 20 and Ciardi Ciardi & Astin are hosting a tax reform webinar on Wednesday, June 27 at 12:00 PM CT with Stephen J. Slade, CPA that you don’t want to miss. Stephen has extensive expertise using planning strategies to benefit owners of small to mid-size companies. REGISTER NOW!

A tax loophole is something that benefits the other guy [but] if it benefits you, it is tax reform.

– Former U.S. Senator, Russell Long.

For nearly all small to mid-size business owners, the major challenge presented on a daily basis is the adequacy of cash flow and whether there is enough money coming in the door to cover their ongoing operating expenses. Business owners must ensure that funds are available to pay their employees’ wages, vendor invoices, the rent owed to their landlord, utility and telephone bills, just to name a few things… Any misstep can cause a significant interruption in the services provided to customers which can put a business on the brink of failure.

Once the operating expenses are accounted for, a small business owner can finally decide if there is enough money left over to pay themselves! That’s when the “a-ha” moment begins to settle in — and a conversation with the CPA is required to determine how much money is necessary to keep Uncle Sam happy. It is normally at this point in time that the CPA delivers bad news and the dreams of simply getting ahead may be unattainable. This cycle is endless, and the small business owner always has higher hopes for next year…

Taking advantage of Tax Reform

The scenario I described above is before “The Tax Cuts and Jobs Act” (aka tax reform) was passed into law. Beginning with 2018, many small and mid-size business owners will enjoy substantial tax savings which should certainly lead to a huge sigh of relief.

In many cases, Tax Reform will lead to a reduction in taxes for small business owners which will help to ease ongoing cash flow concerns. With the prospect of lower taxes on the horizon, business owners can use this excess cash in a variety of areas, such as: 1) ownership in real estate to build equity vs. paying rent, 2) investment in machinery and equipment to increase capacity and sales, 3) investment in new employees to increase productivity and sales, or to simply 4) increase the owners take home pay for all the years of hard work and dedication.

The good news is that tax reform comes in all shapes and sizes! Business owners should consult with their CPAs NOW so that they can begin to strategize ways to maximize their savings. It is important to develop a plan that considers the tax attributes of both your business and individual situation. What works for one small business owner may not work for another. By developing a strategy NOW, steps can be taken during 2018 so that there is enough time for the strategy to bear fruit. If you decide to wait until tax time next year, you could potentially miss the boat on an entire year of savings.

Below are several ideas that small business owners should consider to make the most of the benefits of tax reform:

  • Maximize the new 20% Qualified Business Income deduction available to owners of S-Corporations and Partnerships and to Sole-Proprietors.
  • Determine if you are eligible for a more favorable method of accounting.
  • Convert to a C-Corporation to take advantage of the rate reduction from 35% to 21%.
  • Maximize accelerated depreciation methods.
  • Maximize the benefits of charitable giving.

Tax reform has significant potential to directly impact the liquidity of your small business by leaving more money in the hands of business owners while paying less to the IRS. Please join me for a webinar on June 27th as I go into more detail on how many of these new strategies can be implemented during 2018 to reduce your tax burden NOW!

Stephen Slade will answer tax reform questions like these and much more during the webinar on June 27. REGISTER NOW!

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