Recent Developments in Federal Taxation for Small Businesses
The Tax Cuts and Jobs Act of 2017 was a landmark tax reform package that has helped small businesses to save on taxes. The act lowered the top corporate income tax rate from 35 percent down to 21 percent, provided for 100 percent expensing of certain assets, and created Opportunity Zones that allowed investors to claim capital gains incentives when investing in economically distressed areas. Small businesses have also benefited from the expansion of the 199A pass-through tax deduction, which allowed eligible business owners to deduct up to 20 percent of their qualified business income.
The CARES Act was passed in response to the economic crisis caused by COVID-19 and provides additional relief for small businesses. The act includes the Paycheck Protection Program, which provides forgivable loans through participating lenders to cover payroll, rent, and utilities for businesses that meet certain criteria. The Employee Retention Tax Credit allows employers to take an up-to-$5,000 tax credit against payroll taxes paid in 2020 if they retained employees on their payroll even during the shutdowns due to COVID-19.
Finally, the IRS has also provided additional guidance on how to handle taxes for businesses affected by COVID-19. For example, the agency clarified rules related to the carryback of NOLs and expanded tax relief for partnership audit adjustments. The IRS also announced that it would provide additional time for taxpayers to make quarterly estimated tax payments. Businesses may take advantage of extended filing deadlines for tax forms such as Form 1099.
Going forward, small business owners should closely monitor any new updates or changes in federal taxation so that they can make the best decisions for their businesses. Working with a qualified tax professional is highly recommended to ensure all tax obligations are met.
Additionally, the IRS also created a new Tax Payment Relief Initiative that allows businesses to delay payment of certain taxes due in 2020. This includes federal income tax payments for up to $1 million and self-employment contributions for up to $10,000. The initiative also suspends certain interest, late payment penalties, and certain other fees. Businesses can apply for the initiative directly through the IRS website.
Finally, there have been several recent developments in the area of international taxation that may be of interest to small businesses with operations abroad. The Tax Cuts and Jobs Act implemented a new territorial tax system that exempts qualifying foreign-sourced dividends from U.S. taxation and has enabled businesses to take advantage of reduced rates on repatriated earnings. The IRS also released guidance related to the new global intangible low-taxed income (GILTI) tax, which applies to foreign subsidiaries that generate higher-than-expected profits.
Overall, there have been a number of recent developments in federal taxation that can benefit small businesses. It is essential for business owners to stay informed of these changes and to work with a qualified tax expert to ensure that their tax obligations are met.
By staying up-to-date on the most recent developments in federal taxation, small businesses can ensure that they are taking full advantage of the available tax benefits. This can help businesses increase their savings, remain compliant with regulations, and ultimately maximize their profits.
With these changes in mind, small business owners should keep an eye out for any new updates or changes in federal taxation so that they can make the best decisions for their businesses. Working with a qualified tax professional is highly recommended for any business that needs help understanding the ever-evolving landscape of federal taxation.
By remaining informed and taking advantage of available tax benefits, small businesses can ensure that they are maximizing their profits and staying compliant with regulations. This will help businesses ensure their long-term success and stability.
In summary, small businesses can benefit greatly from staying up to date on the most recent developments in federal taxation. By taking advantage of available tax benefits and working with a qualified tax professional, businesses can ensure that they are compliant with regulations while also maximizing their profits