The New Tax Laws And Your Business
In our country, corporations have a choice to either use the fiscal year end or a calendar year end for their federal income tax reporting. The Congressional Revenue Act, introduced in Congress as the Tax Cuts and Jobs Act (TCJA) amended the IRS Code of 1986. A provision in the TCJA states a corporation with a fiscal year that includes January 1, 2018 will pay federal income tax using a blended tax rate and not the flat 21% tax rate.
These corporations who have determined their federal income tax fiscal years that include January 1, 2018, will first calculate their tax for the entire taxable year using the tax rates in effect before the TCJA, then calculate the new 21% rate subsequently proportioning each tax amount based on the number of days in the taxable year when the different rates were in effect. The sum of these two amounts is the corporation’s federal income tax for the fiscal year. If a corporation has already filed, they may want to consider filing an amended return.
On August 3, 2018, the Treasury Department and the IRS issued a proposed regulation on the new 100% depreciation deduction to allow businesses to write off most depreciable business assets in the year they are placed in service.
The 100% depreciation generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Typically, machinery, equipment, computers, appliances and furniture qualify. The deduction is retroactive, on qualifying property acquired and placed in service after September 27, 2017.
Taxpayers who decide not to use the 100% depreciation deduction must do so in a timely fashion. If a corporation has already filed their 2017 return and didn’t claim the mandatory deduction on qualifying property or did not elect out but want to, will need to file an amended return.
The IRS has also issued information regarding the new tax law changes that allow small business taxpayers to use the cash method of accounting. The TCJA exempts these small businesses from certain accounting rules for inventories, cost capitalization and long-term contracts. More small business taxpayers will be allowed to change to cash method accounting starting after December 31, 2017.
The IRS is continuously working on implementing the new Tax Cuts and Jobs Act. These new laws include major tax legislation that will affect both individuals and businesses.
Our Denver, Colorado business law attorneys and tax law attorneys are up-to-date on new tax laws and changes. We are dedicated to helping small businesses and successfully represent clients throughout Colorado. The 2018 tax season is just around the corner. Call us for a consultation so we may evaluate your business' compliance with the new tax changes.
How do the new tax laws, under the Tax Cuts and Jobs Act, affect your business? Will the tax liability for your business increase? Not if you contact our experienced tax and business lawyers.
Gantenbein Law Firm's Denver, Colorado tax and business attorneys are well-known for being among the top attorneys in the area on the new tax laws.
For a consultation for your business and tax issues, call 303-618-2122.