Qualified Business Tax Update with Trump Tax Plan

A new tax reduction for business owners was added to the newly signed tax law. This new tax law makes provision for individuals and estates to reduce their business income up to 20%. Another new rule that has been making News headlines is the "Pass through" rule. This new rule applies to income from business enterprises like S corporations, partnerships, Limited Liability Companies and sole proprietorships. The new law also made provision for tax payers who fall under the new 37% tax rate bracket to be taxed at 29.6% from January 2018.

There are many rules, restrictions and limitations surrounding the new tax law that might reduce or even terminate the deduction. Although, the new tax law will open doors for business owners, there are limitations or factors that apply, some of these factors are; the nature of your business and how large your taxable income will be in 2018.

To explain further, once your taxable income reaches $415,000 for some service businesses' reduction is no longer allowed. Some of these service businesses' include the following; Law, financial and brokerage services, health and accounting.

The deduction has restrictions, the following businesses' are under the restrictions; businesses' that take part in investing, deal in securities, partnership interest or commodities.

Manufacturing businesses' with over $416,000 as its taxable income are under restrictions from the deduction based on their total entry wage. Also, restriction on personal earning could also result in the reduction of your personal tax deduction.

With the restrictions and limitations of the new tax deduction, it is best to critically analyze how these deductions and its restrictions will affect your business in 2018. All we did here was to scratch the surface, the new tax law has several provisions that could benefit you and your business, so we will love to set up a meeting with you to discuss the best ways to take full advantage of this new law, and also how to ensure that the restrictions does not affect your business.

We will definitely follow up to set up that meeting with you.

CPEOs: Outsource HR and Employee Management

A Professional Employer Organization (PEO) (or employer leasing company) provides a service under which an employer can outsource the burdens associated with human resources, payroll administration, and benefits negotiation. Specifically, PEOs advertise the following benefits to their services:

1.      Expert payroll, employee benefits, and personnel administration—from simple payroll and benefits compliance to complete human resources administration. Many PEOs market their services as freeing businesses from payroll administration and personnel matters.

2.      The ability to get larger group discounts on medical and retirement benefits, more comprehensive fringe benefit programs and, possibly, improved worker's compensation rates.

If your businesses is experiencing one or more of the following problems, you may want to look into utilizing a PEO: (1) delinquent payroll taxes; (2) payroll and/or benefit administration headaches; (3) spiraling benefit costs; (4) inability to retain key employees because of the lack of a competitive benefits program; (5) difficulty hiring good employees; or (6) exposure to discrimination, immigration, or employee benefit claims.

Relationships with PEOs can be structured in numerous ways, depending on the PEO and the business. However, up until now, regardless of the type of arrangement and even if all the employment tax obligations are performed by the PEO, the employer remained liable for employment taxes for wages the PEO paid to its employees. Fortunately, a new type of PEO that may be worth looking into has recently hit the market—a Certified PEO, or CPEO. CPEOs offer a number of benefits over a traditional PEO.Most importantly, the CPEO is solely liable for the federal employment taxes of certain workers covered under the CPEO contract. This means that  you, the employer, are not liable for these payroll taxes if the CPEO fails in taking care of them.

CPEOs receive their certification from the IRS by meeting a number of requirements, including posting a bond, paying a $1,000 annual fee and submitting audited financial statements to the IRS. A list of CPEOs can be found on irs.gov on the “Voluntary Certification Program for Professional Employer Organizations (CPEOs)” page. Click on the “CPEO Public Listing” link in the left hand column. This list should continue to grow as the IRS certifies more PEOs.

If you have any questions or need assistance in this or any other matter, please give us a call. We stand ready to help.