The new Tax Cuts and Jobs Act (TCJA) took effect on January 1, 2018. Most business owners I know have already forgotten that we have a new tax law. As we close in on the end of the year, it is important to review the new tax law and the impact it has on small businesses.
TCJA is the most extensive rewrite of our federal income tax law in over 30 years. Its impact reaches far and wide and has implications for both business owners and employees.
Small business TCJA changes can affect the profitability of your company. It’s a good time to review the impact of TCJA and understand what your small business can do to prepare.
What Kind Of Support Should You Have?
I suppose the best advice you could read in an article like this is to get professional help. Professional help comes in a variety of forms, and there are a few things you can do now to make it easier, later.
If you are a small business and you have been handling your own payroll, stop now. Professional payroll services are relatively inexpensive. They can save you more in some cases than you’ll spend.
Payroll services specialize in payroll processing and compliance, so you don’t have to. Get a payroll service and let them manage the legal trappings of TCJA for you. Small business TCJA changes are far-reaching, so it’s a good idea to leave it to the pros.
Next, consider automated time and attendance if you haven’t already. Automated time tracking can save you a lot of headaches during tax season. Not only is it easier to run payroll and prepare for tax season, it’s safer, too.
Tracking time is a legal minefield. More than one employer has landed in Fine City when audits uncover mistakes. Automating time and attendance for your small business will save you time. It will also keep you compliant with the new tax law and small businesses.
Integrated scheduling is another well-advised consideration. Your automated time and attendance will help you remain compliant. Integrated scheduling will help you reduce costs and improve customer service. Together, you can take advantage of TCJA and improve your small business profitability.
Implications Of The Tax Cuts and Jobs Act (TCJA)
Of course, we can’t go into every detail in the space of this short review. For this reason, we must recommend you seek professional counsel when it comes to TCJA.
Regardless, it will help to review a few items to help you frame your understanding. It helps to have a primer to generate some good questions for your tax advisor.
Following a are few items in the new tax law you’ll want to consider.
Small business TCJA changes include:
Unreimbursed Employee Expenses Are Off The Table
Employees are no longer able to deduct out-of-pocket business expenses. This includes things like mileage, uniforms, computers and continuing education.
Employees will want to submit these items for reimbursement from the company. Your company will want to plan for the impact.
Mobile time tracking, mileage trackers, and Employee Self-Service will help reduce the impact. Good records and established policy are your friends when it comes to reimbursements.
The Standard Deduction Is Now Double
Employees who took advantage of out-of-pocket expense deductions won’t need to fret. The standard individual deduction is now nearly doubled. The new numbers are $12,000 for individuals and $24,000 for married couples filing jointly.
Employees making less than these amounts will not pay any taxes this year.
Passthrough Business Deduction
The new tax law creates a new deduction for pass-through business. Owners can deduct up to 20% of their business income if they qualify.
Employees are not eligible for pass-through deductions.
This new tax law is a significant factor for pass-through businesses. Pass-through businesses are typically small business. Because of this, the new small business TCJA change is a welcomed addition.
No Deduction For Unreimbursed Moving Expenses
Before 2018 employees could deduct moving expenses if the work required the move. The move had to be more than 50 miles.
Congress eliminated this deduction from the new small business tax law. The deduction remains in place for military personnel, but not for private business.
If your business moves, your employees will feel the full brunt of any moving expenses. Consider this before you pull up the stakes. In many cases, the expense can outweigh the costs, and you may lose your workforce.
Elimination of Tax-Free Employee Benefits
In the past, there were some employee benefits that could be provided to employees tax-free. Some of these have been removed from the law.
For instance, moving expenses were one. We have discussed this already. Employers can no longer provide moving expenses tax-free.
There are some other more obscure benefits such as riding your bike to work. Some of these are special conditions that provided for environmental or other public benefits. These were not widely used, and so most will only affect a few.
Check with your tax accountant or payroll professional for clarification on these points. The impact will be more for some than others. Little things can add up, so it pays to at least check into this category of change in the small business tax law.
Before Tax Season Hits
Employers and employees should be aware of the changes in the new tax law. Employers can change policies to lessen any negative impact on employees. Most will be minimal, but with some planning, a lot can be positive.
Finally, don’t be caught off guard. Many business owners may not have evaluated policies in light of the new tax law because they haven’t filed their taxes yet for 2018. We just aren’t thinking about the new small business TCJA changes.
But now you have been warned, and at least have a basic idea of some of the changes and how they might affect you.
Check with your payroll professional, tax accountant, and time tracking software to make sure you are ready for tax season.