Tax Relief for Small Business: Fact or Fiction?
Whether news of the new federal tax plan leaves you feeling hopeful, doubtful, or simply left out, there are important implications for all small business owners. Taxes are commonly cited as the number one concern of small business owners in the United States. Under the proposed new tax bill, the maximum tax rate for small businesses, categorized as pass-throughs, was reduced. However, there are varying rates, deductions, and special exclusions for sole proprietors, partnerships, s-corporations, c-corporations, and limited liability companies. And, there are as many opinions about how or if this new plan will benefit the majority of small businesses. A small business attorney will help you find experts who can help you in small business tax law. This post will discuss who is meant to benefit from the new tax plan, who is potentially left out, and what you can do to ensure your own compliance and maximum tax benefits.
Who does the New Tax Plan Benefit?
A November 3, 2017 CNBC article calls small business a vital and often overlooked engine of economic growth. Responsible for 63 percent of net new jobs from 2010 to 2016, according to the U.S. Small Business Administration, small businesses have the ability to create jobs, fill gaps in the marketplace, and strengthen the communities they serve. A unified or comprehensive tax reform, which provides relief to small businesses, would enable this “engine of economic growth” to run more smoothly.
Meant as a template for legislative committees of tax-writing, the Unified Framework for Fixing Our Broken Tax Code was published by the Committee on Ways and Means in September 2017. These are some of the changes that impact small businesses.
- The maximum tax rate applied to small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations will be 25 percent.
- The corporate tax rate will be reduced to 20 percent.
- Numerous special exclusions and deductions for businesses will be eliminated.
- Deductions for net expenses by c-corporations will be limited.
Who is Overlooked in the New Tax Plan?
Because the typical small business pays taxes individually by the owner, some business analysts contend that most will not benefit from the new tax plan. The LA Times further reports that approximately 86 percent of pass-through/small businesses already pay no more than 25 percent under the individual code, so there would be no tax cut benefit for them. The National Federation of Independent Businesses president, Juanita Duggan, is cited as saying that, while the proposed bill leaves too many small businesses behind, nearly all small businesses would benefit from some tax relief under this bill. A small business attorney can review and make recommendations about your business structure through the life of your business so that you are not among the overlooked.
What Can You Do to Ensure Compliance and Maximum Benefits?
For small business owners who are either just starting out, well-established, or relocating to Colorado, it is important to consult or work with experts in order to avoid costly compliance mistakes and to maximize all of the tax benefits to which you are legally entitled. The IRS provides a virtual tax center for the self-employed and small businesses where you can find information on preparing, filing, and paying taxes. Your small business attorney will also help you to get organized and keep accurate records to make every tax season as stress-free as possible.
If you need business advice, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: firstname.lastname@example.org
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