Taxes can be a particularly frustrating part of running a business. Filing on behalf of a company is often much more complicated than the average personal tax return. Audits tend to be more of a hassle as well.
Because a higher value is likely at stake, many Illinois business owners spend ample resources making sure that taxes are under control. In light of the Republican-formed tax reform policy, you might have to direct your attention to the financial implications.
Payroll and withholding
First, the new federal policy affects withholding for employees. At this point, your company has probably received updated W-4 forms from workers. The IRS released new guidelines for withholding so that employees can come as close to fulfilling income tax obligations as possible. While this doesn’t directly impact the business’ taxes, it is still an important part of planning.
As a business owner, you may file taxes in a special way depending on your corporate classification. If you own a sole proprietorship, partnership, LLC or S-corp., you will have pass-through income taxes. The company’s net profits have a parallel income tax rate to your personal rate.
The tax reform creates and eliminates several deductions, including the pass-through rule. Although there is now a 20% deduction for owners with pass-through income, some will not qualify based on their industry and other factors.
Make an estimate
While the changes leave much to uncertainty for businesses, you can prepare for next year’s taxes using this year’s information. Comparing deductions between the two years can help you understand how much more your company could owe the government.
This allows you to figure out the matters which may hurt or help your business in the coming year. In response, you can adjust your tax plan accordingly.