1. Small business tax - 2018 Kumar Consulting CPA

2. 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
April 25, 2019

3. 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
April 25, 2019

4. 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
April 25, 2019

5. 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
April 25, 2019

6. 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
April 25, 2019

7. 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
April 25, 2019

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