Last Minute Year-end Tax Strategies
for Small Businesses 
Jacquelyn Himes, CPA
Focused on You. Dedicated to Your Success.
December 10, 2018

As this year is about to end, it’s a good idea to make sure you’re on track to reach your company’s goals. It’s also a good time to take advantage of last-minute planning opportunities that could reduce your tax burden. 

With all that in mind, please contact us at your earliest convenience to discuss your tax situation so we can develop a customized plan to address your business’s specific financial needs. Here’s a look at some of the issues we’re recommending that clients consider as they begin their end-of-year review.

Tax Cuts and Jobs Act (TCJA)
As you know, TCJA was signed into law at the end of 2017. The IRS’s Businesses tax reform page provides updates and resources on how TCJA will affect your business. 

New laws and regulations could have an impact on how you manage your business or tax planning. Below is a summary of important developments you should be aware of: 
  • The Domestic Production Activity Deduction (DPAD) was repealed for tax years beginning after December 31, 2017.
  • Entertainment expenses are no longer deductible. You may continue to deduct 50% of the cost of business meals if you (or your employee) are present at the event and the food or beverages aren’t considered lavish or extravagant. 
  • You can claim a larger 100% first-year depreciation deduction on qualified property (new or used). The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. 
  • More “small businesses” can use the cash (as opposed to accrual) method of accounting starting in 2018 than previously allowed. To qualify as a “small business,” taxpayers must, among other things, satisfy a gross-receipts test. The gross-receipts test is satisfied if, during a three-year testing period, average annual gross receipts don't exceed $25 million (the previous limit was $5 million). 
  • The carryback of net operating losses (NOLs) is repealed effective for tax years ending after Dec. 31, 2017; NOLs can now be carried forward indefinitely. In addition, NOLs generated after 2017 cannot reduce taxable income by more than 80%.

We’re here to help you navigate the changes and ensure you receive the most favorable tax treatment.

Partnership Audit and Adjustment Rules
New audit and adjustment rules are now in effect for tax years beginning in 2018. Careful planning today will help mitigate any unfavorable consequences on both the entity and the partners themselves. Also, be aware that even if your business isn’t a partnership, you’ll want to evaluate the effect these new rules could have if you’ve invested in any partnership.

Reminder for New Tax Return Due Dates
Due dates changed for partnerships, C corporations and several other types of business returns last year. For calendar-year partnerships, the filing date is now March 15 and is April 15 for C corporations. The date for fiscal year C corporations is the 15 th of the fourth month following the end of the corporation’s calendar year. This is good news. In fact, the CPA profession has long advocated for these changes because they’ll minimize tax season complications and delays and make it easier to ensure tax returns are accurate and on time. State returns are continuing to adopt new due dates in response to the changes. 

Corporate Alternative Minimum Tax (AMT)
The corporate AMT is repealed effective for tax years beginning after December 31, 2017.

Wayfair
On June 21, 2018, the U.S. Supreme Court handed down a historic decision in the sales and use tax nexus case South Dakota v. Wayfair, Inc. The 5–4 ruling overturns physical presence standards upheld in previous cases, such as Quill Corp. v. North Dakota (1992) and National Bellas Hess Inc. v. Department of Revenue of Illinois (1967), where a business had to have a physical presence in a state for that jurisdiction to impose sales and use tax collection obligations on the business. The Court’s decision in Wayfair will affect companies that have an economic presence in a state if that presence meets that state’s nexus standard under the Court’s new ruling. If you’d like to discuss the impact of the case on your business, please call our office today.

Retirement Planning 
When was the last time you revisited your company’s retirement plan? We recommend you review your situation at least annually and make revisions and adjustments as needed. That includes making the most of the many tax-advantaged retirement saving options for small business owners, some of which allow annual contributions that can be significantly higher than those for employees. In some cases, you can establish these plans for yourself and offer them to key employees.

Participants can contribute up to $55,000 to SEP IRAs in 2018 (or 25% of compensation, whichever is smaller). For a SIMPLE IRA, the 2018 contribution limit is $12,500. Solo 401k plans are eligible for both employee and employer contributions. In all cases, participants age 50 or older can make catch-up contributions.

Feel free to call any member of our team at 610-828-1900 with questions. You can also contact Jackie Himes, CPA, director – tax services at Jacquelyn.Himes@MCC-CPAs.com or me at Marty.McCarthy@MCC-CPAs.com . Planning ahead can help you minimize your tax bill and position you for greater success. 
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).