The new presidential administration has many small business owners wondering what to expect when filing taxes this year. You can prepare for filing your business's returns and also paying what you might owe the IRS by learning about some of the more important changes that lie ahead for the 2017 tax season.
Depending on the type of business you own, you may need to file and pay your taxes sooner than you did last year. The deadline for filing and paying has been moved up from April 15 to March 15 this year if you utilize Form 1120 and your business is a C-corporation, an S-corporation, or a partnership.
If you fail to or cannot make the March 15 deadline, you must file for an extension from the IRS. Even if you are granted an extension on filing your taxes, you must still pay what you estimate that you might owe to the government. The extension does not apply to paying your taxes, which are still due on March 15 this year.
Deductions and Credits
Small business owners may be eligible for new deductions and credits this year when filing taxes. For example, if you purchased new or used equipment for your business, you can deduct up to $500,000 of it on your returns. This deduction comes as a result of the PATH Act, which has been extended until 2020.
Likewise, you might be able to claim a bonus depreciation credit, which lets you deduct 50 percent of the cost of new capital equipment on your returns. The deduction goes down to 40 percent next year and 30 percent in 2019. It will be discontinued in 2020.
If you hired military veterans or people who have been out of work for at least 27 months, you should be able to claim the Work Opportunity Tax Credit. This credit gives you 40 percent of the first $6000 that you paid out in wages to long-term unemployed individuals.
Finally, you may be able to claim the Research and Development Tax Credit if your company made less than $50 million yet you invested heavily in research. You can use this credit to put toward the Alternative Minimum Tax, or AMT, or to offset payroll taxes.
Social Security Taxes
Another corporate tax change to expect this year involves how much you will pay into Social Security. The Social Security Administration has raised the cap on the taxable income that will be subject to the 7.65 percent tax for both Social Security and Medicare.
The cap for independent contractors' taxable income has been raised from $118,500 to $127,200. Self-employed individuals will pay 15.3 percent on the first $127,200 that they earn.
Simplifying Tax Return Prep This Year
What can you do to file returns that abide by these 2017 corporate tax changes? Some of the more straightforward ways to file and pay your taxes easier this year involve:
- using tax preparation programs like those available from Turbo Tax, H&R Block, and others
- keeping your business and personal finances separate
- using high-quality accounting software like QuickBooks
- using the services of a tax professional for easier and faster tax prep or for reliable advice
- a home office
- automobile use, upkeep, and repairs
- dining (up to 50 percent)
- entertainment (such as taking business clients out to dinner or to a movie)
- setting up and contributing to a retirement account like a Roth IRA
Again, if you are unsure of what deductions to claim or how to prepare your returns in light of this year's new corporate tax changes, you should rely on the guidance and advice of a tax professional.
The change of leadership in the Oval Office ushers in an array of corporate tax rules about which you should be aware. You can prepare your returns and pay exactly what you owe by learning more about these requirements before you file.