Many people are feeling confused about the new tax laws and how they will affect them. It’s understandable, as there is still a lot of ambiguity surrounding the details. Before going to a tax consultant with your box of receipts, knowing the specifics will make your business tax filings much more manageable is important. Don’t hesitate to seek legitimate answers to your questions and concerns.
With the approval of the tax reform bill in December, people may assume that the changes have already taken effect and that they need to fill out the forms accordingly. However, it is important to note that the 500-page law primarily affects the filings for 2018 and not what is payable for 2017.
Key Highlights of the New Tax Bill
As you work on maximizing your deductions for the tax year of 2017, there are a few things to keep in mind. Firstly, consider paying your valued property taxes for the next year and increasing your charitable donations. Additionally, there is a modification that some may still be able to take advantage of. This modification is related to a retroactive decrease in the limit for medical bill deductions. For the tax year of 2017, if your medical bills exceed 7.5% of your income, you can deduct them from your business tax filings. This percentage is a significant decrease from the previous limit, which was set at 10%.
The changes are not as simple for small businesses as the information is not yet clearly provided. The treasury department has stated that some service-oriented businesses, such as bookkeeping and law firms, are not eligible for tax reductions for limited liability companies. They typically pay their taxes on the personal tax returns of the owners. However, which types of service-based businesses are liable to follow this clause is not clearly defined. This clause is to be clarified somewhere later in the year.
Your Paycheck will Increase, but is That a Good Thing?
Around 90% of Americans will see a rise in their paychecks, which should be considered good news. But not for long, as employers will adjust employee withholdings under the new law. A change in the IRS withholding table, which guides employers to deduct from employee’s paychecks, is responsible for the adjustment. This responsibility means taxpayers should ensure the exact amount being withheld from their paycheck as they do not want to own the IRS at the end of the current year. This change will significantly affect business tax filings for most of the population in the upcoming year.
Slower Refunds
If you expect a refund this year, you might need patience as all federal returns filed by standard mail might run late. However, it might not be such a significant issue for most citizens. However, low-wage earners who rely on these refunds to pay their bills will get a setback. Therefore, you are better off filing electronically as electronic business tax filings are not expected to be delayed.
Watch Out for Scams and Quick Refunds
As mentioned earlier, taxpayers are expected to get slower refunds. Because of that, short-term anticipation loans are expected to be in higher demand. Therefore, it is advised by the Center for Economic Progress that it is probable that these loans will charge predatory rates. Taxpayers should avoid them as much as possible. Moreover, if an outside company offers you quicker refunds, the likelihood of a scam is quite imminent. You are also advised not to trust any phone calls that are portrayed to be from the IRS, as they will only ever reach out to you through the mail.
Following these guidelines for business tax filings will ensure that you end up with a lesser tax burden for the upcoming year.
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