Now is an opportune time to review your current tax situation
As 2019 comes to a close, now is an opportune time to review the current tax situations for both individuals and businesses alike. It is our goal to ensure that our clients are aware of, and take full advantage of any beneficial tax strategies and opportunities available, and to begin next year’s planning process as well.
With so many changes made to tax law with the signing of the Tax Cuts and Jobs Act (TCJA), and with many additional changes undoubtedly on the way, we would like to take this opportunity to keep you up to date on some key considerations we have found to have the largest impact on our clientele:
- Deductions - With the increase in the standard deduction, many taxpayers who itemized in the past may not benefit from doing so in the future. This has created the strategy of lumping deductions (i.e. charitable contributions) into a single year in order to receive the most benefit.
- Withholdings - Many taxpayers found that under the new tax regime, their total withholdings at year end either resulted in a larger refund or liability than in years past. With proper planning, any potential penalties for underpayment, or interest-free loans to the federal government, can be avoided.
- Kiddie Tax - Tax on children’s investment income is now calculated at the trust and estate tax rates. Depending on the category of income and type of tax return filed, their total liability can potentially be mitigated.
- Opportunity Zones - This is a strategy for deferring tax on realized capital gains, up to 15%. In order to take full advantage of this new incentive, you must invest your capital gains before December 31st, 2019! For more detailed information please see our related post.
- Entity choice - With the corporate tax rate dropping to 21% and the introduction of the Qualified Business Income deduction, it is crucial that your chosen entity type is the most advantageous for your situation.
- Meals & Entertainment - While meals continue to be 50% deductible, entertainment is now a disallowed deduction.
- Property and equipment - With changes to the limits and types of property and equipment which qualify for full and immediate expensing, there are many more potential planning opportunities in terms of year end purchases to decrease taxable income.
- Accounting method - More businesses are now allowed to utilize the cash method of accounting which is both simpler, and may be beneficial for cash flow purposes.
- Wayfair ruling - Due to the recent Supreme Court ruling in South Dakota v. Wayfair, Inc., your business may be responsible for sales and use tax in more places than in years past. For your further reading, we have a fantastic blog post which goes into more detail on this specific ruling.
Again, these are just a few of the many new provisions of the tax code we would like you to be aware of. If you are interested in discussing your current financial situation for the current year and beyond, or have any questions regarding the items listed here and how they may affect you, please contact us at your earliest convenience in order to minimize any potential surprises at tax time.
Aaron Lavarias, CPA
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