TAX PRO PLUS LA

After Tax Reform, Which Is Right for You: S Corp or C Corp?

The Tax Cuts and Jobs Act has left many of today’s businesses with big questions. Incorporation remains a hot topic, but this law is shaking things up. It’s quick to assume your company should be one or the other, but without careful consideration of the facts, your organization may end up facing financial loss, hefty tax penalties or missed tax savings.

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Kiddie Tax No Longer Based on Parents' Tax Rate

Some years back, it was not uncommon for parents to put their investments in their dependent children’s names to take advantage of their children’s lower tax rates. Although the Uniform Gift to Minors Act legally made a child the owner of money put into his or her name, this didn’t stop parents from routinely putting their child’s name and social security number on the accounts so that the tax would be determined at the child’s lower marginal rate.

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Opening a Small Business is a Huge Risk

Avoid these issues and your odds for business success are much greater.  Watch our video.

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Tax Reform 2.0 Is in the Works

The dust has not yet settled from the Tax Cuts and Jobs Act (TCJA), passed into law in December 2017, and the House Ways and Means Committee is already considering another round of tax changes. The committee chair, Kevin Brady, Republican from Texas, wants to include input from stakeholders such as business groups, think tanks and other relevant organizations. Historically, major tax reforms have been decades apart, so the committee chair is looking for another approach to the way Washington deals with tax policy.

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IRS Regulations Clarify Business Pass-Through Deduction

Some of the major provisions of last year’s tax reform legislation were the many benefits provided for businesses, including cutting the C corporation tax rate to 21%. Not to leave out other forms of business, the bill also included what was termed the 20% pass-through deduction that applies to sole proprietorships, partnerships, s-corporations and the like. The short-hand title for this tax benefit is the Sec 199A deduction, and it is one of the more complicated pieces of tax legislation ever conceived by Congress. So complicated in fact that the legislation left a lot of unanswered questions, and for the most part the tax preparation community has sat back and waited for the IRS to release regulations, hoping they would explain the many grey areas of this new deduction.

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