Small business tax - 2018 Kumar Consulting CPA www.kumarconsultingcpa.com puja@kumarconsultingcpa.com 913-385-7873

Agenda – Small business tax Corporate Taxation Pass Through Entities Deduction & Expenses Section 179 Deduction Bonus Depreciation NOL Deduction Qualified domestic Property deduction Deduction for entertainment expenses Interest Expense Foreign Taxation Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019

Business structures Sole Proprietor –Default setup for single owner business which requires little or no paperwork. No separation between business and personal liability Partnership – Setup for multi-owner business again very little paperwork. No separation between personal and business liability C Corporation – Protection from personal liability. Costly to form; significant paperwork to form C Corporation S Corporation – Protection from personal liability, number of shareholders are limited. S Corporation elect to pass corporate income, losses, deduction and credits through to their shareholders for federal tax purposes Limited Liability Company ( LLC) – Protection from personal liability, less record keeping than corp. Limited Liability is a business structure allowed by state statue. Depending on the election made by the LLC, IRS will treat an LLC either as a C Corporation, S Corporation, Partnership or sole proprietorship. Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019

Corporate Taxation Change from graduated tax rate structure for corporations Top rate of 35% is being replaced by flat rate of 21% Cash accounting available for corporation with gross receipts for 3 prior years less than $25 million Previously cash accounting was available for gross receipts for 3 prior years less than 5 million Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019

Pass through entities Entity Types: S corporation, Partnerships, LLC and sole proprietors New law creates a 20% deduction on income for pass-through entities Deduction is dependent on factors such as: Nature of business activity Business owner’s total taxable income Wages paid by the business Value of business property Deduction is phased out based defined income range Qualified businesses 20% deduction is capped by greater of 50% of W2 wages or 25% wages + 2.5%. Of qualified business property Single Filers Income - Married Filling Deduction Not More than $157,000 Not More than 315,000 20% of business income $157,000 - $207,000 $315,000 - $415,000 Reduced Pro-rata More than $207,000 More than $415,000 None (specified service business) Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019

Deductions and expenses Section 179 Deduction Expense up to $1 million and phase out has increased to $2.5 million. Maximum allowance is limited to the amount of income from business activity Bonus depreciation Deduction expanded to include used property NOL deduction Carried forward indefinitely subject to a limit of 80% of taxable income NOLs can no longer be carried back for 2 years Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019

Deductions and expenses Qualified domestic Property deduction Section 199 deduction for qualified domestic property deduction repealed Entertainment expenses Deduction Deduction directly related to or associated with the conduct of business repealed Interest Expense Deduction for business interest expenses capped at 30% of adjusted taxable income Small business with annual average gross receipts of $25 million or less for the past 3 years is exempt from the rule Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019

Foreign taxation Revamp to international tax system Reduced Repatriation tax on profits earned overseas Kumar Consulting CPA puja@kumarconsultingcpa.com April 25, 2019