For most of us, taxes are pretty straightforward: You get your W-2, fire up some online tax software, and click away. But for entrepreneurs and small business owners, tax life gets a little more complicated.
Of course, there’s your salary, but then you might have dividends or other income, a slew of deductions, and then sorting out all those business and personal expenses. And Trump’s new tax bill didn’t just affect personal filers but small businesses as well. So here are some the biggest changes to tax laws over the past year and what small biz owners need to look out for before filing their taxes.
Normally it’s just Congress and the president proposing, passing, and signing new tax laws. But every now and then the Supreme Court wanders into the fray, interpreting existing laws and even closing some tax loopholes. One of those that got tightened this year was one that allowed out-of-state, online retailers to avoid charging a state’s sales tax when selling to residents. That means e-commerce small businesses may be responsible for remitting sales tax to the state, though you can likely pass the cost on to paying customers.
One cool thing about organizing your small business as a partnership? The business itself doesn’t need to pay taxes. But that just means the tax liability flows directly to the individual tax returns of each partner. And that also means partners must maintain excellent records of income and expenses, consider compensating employees in additional benefits rather than raising wages, and maybe even re-organizing the business.
Instead of owning a small business, you are the small business. So what does that mean for your taxes this year? First, make sure you’re properly classified as a consultant for tax purposes. Then, you’ll probably want to consider paying your estimated taxes quarterly, rather than getting nailed with a huge tax bill at the end of the year. Finally, make sure you’re taking advantage of all your deductions, and doing it correctly, so those quarterly payments are accurate.
Taxes for the small business owner can be a nightmare. So consider bringing in the experts — contact a local tax attorney today.