How many times have you heard the phrase “everything changes?” Have you ever wondered what would happen if we didn’t accept change? What if your technology department at work insisted you put everything on a floppy disc and use an Apple 2e because they didn’t learn about new technology? What if your doctor suggested curing your sleeplessness with a simple frontal lobotomy? You may laugh but think about all the careers that require lifetime education to ensure they are providing the best services or products.
Last tax filing season, several changes were written into legislation as part of the Tax Cuts and Jobs Act. This extremely robust change in regulations not only affected individuals, but also businesses, nonprofits, and even government entities. Full clarification on this new law didn’t get distributed until as late as fall of 2019, well past tax time! Imagine if a CPA took the Apple 2e/lobotomy approach and didn’t get educated on the new tax law…scary, right?
At Vesta, we pride ourselves on being your trusted partner year-round, especially during tax season. To help you navigate the new tax law, our Senior Manager, Tina Funk, CPA assembled four hot topics of the new tax law. If not researched or accounted for properly, these four can significantly impact your taxes.
1. Don’t mix personal and business. It has never been a good idea to pay personal expenses with a business account or bury personal expenses within a business deduction. If discovered under audit, it can lead to big problems such as the IRS classifying those expenses as wages or a taxable dividend. In this case, penalties can be substantial. Take the extra time to set up a separate business account to help differentiate business from personal – when in doubt, consult your CPA.
2. Entertainment can’t be deducted. Under the new Tax Cuts and Jobs Act, entertainment-type expenses are no longer deductible. CPAs educated on the new law can determine if there are opportunities to convert nondeductible expenses to deductible expenses (i.e., advertising or promotion vs. entertainment).
3. Understand the Qualified Business Deduction. This new deduction is quite the puzzle. Many pieces factor into the Qualified Business Deduction, and proper tax planning is necessary to maximize this deduction. If you feel you qualify, you should consult your tax professional to determine what qualifies and what doesn’t. It is better to be safe than sorry on this one.
4. Know your sales and multi-state tax obligations. With online shopping, ease of sales across state borders happens more often than you think. Check to make sure you did, indeed, pay sales tax on your online purchases! Many online vendors have reports you can generate to review purchases throughout the year.
It is essential to pay attention to these big four this tax season! Failure to report correctly can result in paying more than you owe – costing you interest and penalties if you don’t pay. Big mistakes can be avoided by sitting down and talking with a Vesta tax expert. Don’t give the IRS an excuse to scrutinize your tax return, stay alert, and make smart, informed decisions when it comes to new tax laws.
