2019 Year End Tax Planning

Most Atlanta business owners prefer to focus their attention on strategy, product development, supply chain management, pricing strategies, cost management and more. Many prefer to stay narrow and spend the most time where they have a passion for what the business does and leave the rest to employees or vendors. One area that many don’t pay much attention to until the end of the year is tax planning. It’s common to think about what steps can be taken to help reduce the company’s overall taxes before year-end. The good news is since the 4^th quarter just started, there are many steps companies can now take to ensure they pay the least amount possible. There are some new opportunities courtesy of the Tax Cuts and Jobs Act of 2017 (tax reform) and a bevy of other strategies as well. To help clients, prospects, and others with year-end tax planning, Wilson Lewis has highlighted a few of the strategies Georgia companies can act upon below.

New Tax Planning Opportunities – Tax Reform

There were many beneficial changes ushered in with tax reform. While these were effective for the 2018 tax year, many taxpayers may still be unfamiliar with the opportunities or how to take advantage of them. Below is an outline of some of the most valuable tax-saving opportunities.

Qualified Business Income Deduction

This valuable deduction allows certain business owners to claim a deduction of up to 20% of their business income. It’s limited to qualifying owners of flow-through entities (like partnerships and S corporations), sole proprietors, and individuals with rental real estate activities. When originally issued there were many questions about how the deduction would apply or could be claimed. The IRS has issued several regulations addressing these concerns, which means additional taxpayers may be able to reap some benefit.

Current Year Business Losses and Net Operating Losses

Current year business losses are now limited. A single non-corporate business owner can only deduct a $250,000 loss against other income in the current year. Any excess business losses will create a net operating loss (NOL). NOLs can no longer offset prior year profits, and they can only offset up to 80% of current-year income. It’s important to understand how these changes will affect your business planning and tax situation.

Qualified Opportunity Zones

The previously used tool known as like-kind exchanges (1031 exchanges) has been modified and is now limited to real property. This means that gains from the sale of personal property will typically become taxable. The good news is the tax on the gain can be deferred through investing in a Qualified Opportunity Zone (QOZ) before year-end. The IRS has released multiple guidelines for taxpayers that make it easy to understand how QOZs is an effective tax planning tool for Atlanta businesses.

Additional Strategies

There are many aspects of tax planning that did not change with tax reform. As the end of the year approaches, consider performing the following tasks to reduce the company’s tax bill.

• Prepay business expenses to reduce your taxable income.
• Run the numbers to identify what the depreciation strategy should be. Should the company elect out of bonus depreciation so that it can spread the costs of those equipment expenditures out over several years?
• Clean up the books. By cleaning up bad debts, writing off obsolete equipment, or shoring up inventory, you can often score a few more business deductions.
• If you plan to give holiday bonuses, make sure they go out before the end of the year so you can take the payroll deduction.
• Collect W-9 forms from vendors who provided you a service. You will need to draft your 1099 forms by January 31^st.
• Delay your billings until 2020 so that you can defer income until the next year.
• Max out your pre-tax retirement accounts to reduce your taxable income.

Contact Us

While tax planning is a year-round task that requires ongoing monitoring, often times the details come into focus in the last quarter of the year. It allows the business owner to make strategic decisions that will not only impact taxes for 2019, but also the business beyond the new year. For this reason, it’s critical to consult with a qualified tax accountant who can analyze your situation and provide the best advice. If you have not been approached by your current accountant to review your situation, then you may be missing out on tax-saving opportunities. For additional information please call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.