small business

End-of-Year Tax Considerations for Small Businesses

Another year is drawing to a close. While most of us are busy making merry, gathering with friends and family, and trying to remember where we stashed the Christmas gifts we bought back in July, there’s something else we should be preparing for: tax time.

While Uncle Sam doesn’t come calling until well after Santa is relaxing on a beach in Bermuda, time is running out to take advantage of 2018 small business tax breaks and incentives. If you’re looking to keep more money in your pocket come April 15, it’s time to act – preferably before you break out the spiked eggnog!

How Does a 20 Percent Deduction Sound?

If you offer your customers 20 percent off their purchase, they’ll probably get pretty excited. Well, get excited: In 2018, for the first time, Uncle Sam is offering you a 20 percent deduction on qualified business income.

For some business structures – think S-Corps or sole proprietorships – this is a sweet deal. And like most sweet deals, it comes with some not-insignificant red tape.

To qualify for the deduction, your taxable income can’t exceed $157,500 for single folk, or $315,000 for married couples. (Some service trades, such as doctors and lawyers, may have different limits.)

Thinking of finding a loophole, such as splitting up your company so one part can qualify for the deduction? Don’t. The IRS calls this “crack and pack,” and the practice is highly frowned upon.

The End of Half-Price Entertainment

Back in the good ol’ days of 2017, small business owners could schmooze their clients in style, claiming a 50 percent deduction on the cost of entertainment-related meals and sporting events.

Wave bye-bye to those subsidized NFL tickets. In 2018, deductions for sporting events are a no-go, and while you’re still allowed to take the 50 percent deduction for business meals, the meal can’t be “lavish or extravagant under the circumstances.”

Hopefully you were already planning for this when the new 2018 rules came out. But if not, remember it now so you don’t put it on your taxes: You can’t deduct half of every steak tartare and Manhattan you’ve consumed with your clients in 2018. And certainly remember before doing anything too crazy in the last couple weeks of the year.

Ramp Up Your Retirement Fund

Want to reduce your taxable income while you help ensure you can (eventually) retire to Tahiti? Max out your IRA before the ball drops in Times Square!

Consider the SEP IRA – a retirement account designed for small business owners and the self-employed. 2018’s tax laws allow for most SEP IRA holders to pad their retirement fund with up to 25 percent of their compensation or $55,000 (and $56,000 in 2019), whichever amount is lower. That’s a pretty big chunk of change to clear off your “taxable income” column!

But you don’t need to rush too hastily on this one: You actually have until the tax filing deadline of a year (not the end of a calendar year) to make retirement-account contributions.

Don’t Go It Alone!

The tax laws are always changing, and unless you have a ton of free time – as well as an advanced accounting degree and a copy of all 74,608 pages of the federal tax code – on your hands, you’re better off biting the bullet and paying a professional to prepare your 2018 return. In fact, you can deduct their fees as a business expense.

Don’t wait! If you get your ducks in a row now, you’ll be in a much better place come April 15!

At Mischa Communications, we aren’t tax professionals – but we do play the numbers game. Call us today and let us show you how we can help grow your brand, customer base, and bottom line!