President Donald Trump has signed into law the most extensive overhaul of the US tax code in nearly 30 years and it’s arguably the most significant legislation of Trump’s presidency. But for small and medium businesses (SMBs), across various industry verticals such as Automotive, Healthcare, Manufacturing, Not for Profit, Restaurant, Technology and Retail, the pertinent question is, how can they leverage this tax reform to their advantage?
In this blog, we will explore three critical actions that SMBs should take to stay on top under the new tax landscape
- 1. Re-evaluate your company’s structure carefully
Per the new tax reforms, rates are not only considerably lower for corporations, but there are enormous new deductions accessible for pass-through entities (S-corps, LLCs, etc.) that will further lower tax liabilities. SMB owners should proactively evaluate the structure that will benefit their business the most in the coming years. This evaluation can be conducted by the SMB owner in collaboration with their accounting partner by doing a pro-forma analysis of their 2017 income statement, using 2018 rates for both corporations and pass-through entities, to see what’s best going forward.
- 2. Purchase new equipment
The tax reform substantially increased the amount that can be instantaneously deducted for the procurement of capital equipment, from $500,000 to $1 million per year. No long standing depreciation, no deferments – just a huge deduction when a SMB owner buys long-term assets.
- 3. Take advantage of estate tax exemptions
Previously, the lifetime exemption was $5.5 million per person, or $11 million per couple. New rules allow for $11.2 million per person and $22.4 million per couple. So business owners now have a much greater opportunity to pass on the business to future generations during their lifetime, or at death, without losing assets to taxes.
Tax season is a stressful time for every business, whether small, medium or large. Between daily operations and long-term management issues, SMB owners have enough to worry about and adding a heap of tax considerations makes it even more difficult for them to decide where to best allocate their time.
One feasible way to focus on your business’s growth and overcome tax rate challenges is to leverage the services of a finance and accounting outsourcing provider, who can meet all your tax needs from business tax returns to individual tax returns to tax planning and can also take on the day-to-day responsibility for accounts receivable, accounts payable and financial reporting so that business owners can focus on the more strategic aspects of their business.
Whether an SMB owner faces an unmanageable financial reporting situation, needs guidance on tax planning, or is facing challenges in accounts receivable and accounts payable, Quatrro is committed to helping them through its cost-effective financial and accounting outsourcing solutions and a range of other affordable business support services tailored specifically for SMBs.