The reason is the Tax Cuts and Jobs Act.
With all the changes in the new law, many owners of small to medium-sized businesses may want to take a little more time this year to make sure they take advantage of all the opportunities available to minimize their tax bill.
More time will provide:
- The chance to review and strategize how all the changes impact a specific business
- The ability to take advantage of any additional guidance released by the IRS subsequent to the normal filing date
Here are some of the changes in the law that entrepreneurs and business owners may want to review and consider:
The biggest change—and best news—is that corporations are now taxed at the significantly lower rate of 21%.
Pass-through entity deductions
Partnerships, S-Corps, and LLCs—pass through entities to the business owner’s personal tax return—may be eligible for an additional deduction through Section 199A. This may be a complicated calculation depending on the entity’s structure and circumstances, but it could prove highly beneficial.
Bonus depreciation is increased to 100% for 2018. If a business buys tangible items, chances are good that it will be able to write off the entirety of the purchase in 2018.
Section 179 eligibility
Expenses like roofs, HVAC systems, fire protection and alarms, and security systems are now eligible for immediate expensing under Section 179.
Family and medical leave
If a business made payments to workers on Family or Medical Leave during 2018 – it may be eligible for an additional credit.
Alternative Minimum Tax
The corporate AMT has been eliminated, which may change tax filing for some businesses.
Cash method accounting
If a business has under $25 million in gross receipts, it may be eligible to use the cash method of accounting. (Previously the threshold was $10 million.) In addition, some industry obstacles have been removed.
Businesses below the $25 million gross receipts threshold may no longer be subject to additional costs to inventory per Rule 263A.
There’s a greater potential to expense inventory if a business satisfies certain requirements—among them, being under $25 million in gross receipts.
NOTE: If you have any tax payments due related to your 2018 filing, they still need to be made by the original, non-extended due date even though you filed for an extension.