2019 Business Tax Filing Changes
Tax law is ever evolving. Each new change to the law presents businesses with different requirements to adhere to and fresh challenges to overcome. The changes contained within the Tax Cuts and Jobs Act affect tax for domestic and international businesses in dozens of ways. Many of the new changes are already in effect and a large number apply to 2019 tax returns.
Staying up to date with tax law is essential for the success of your business. Here are the seven highlights of the 2019 business tax filing changes that you need to know about:
1) Business Expensing & Depreciation Alterations
Depreciation & expensing have changed under the new law, which can impact business tax. The changes include:
- New depreciation limits for personal use property and luxury automobiles
- More immediate expense for businesses
- 100% temporary expensing for some business assets
- Treatment alterations to some farm property
- Farming businesses have a different depreciation system
- Relevant real property recovery period.
2) Tax Calculation Changes
Under the new law, tax will be calculated in a different way for many people, including those who are self-employed and who run small businesses. A large number of taxpayers will need to adjust how much estimated quarterly tax they pay. Some of the new reforms, include:
Higher standard deduction
Different expense deductions for businesses
Changes to tax rates
Changes to tax brackets
New limits on some deductions
Removal of some deductions
Higher child tax credit
- Elimination of personal exemptions
The IRS has advised that every employee complete a Paycheck Checkup in order to avoid penalties and unexpected bills. Resources that may be helpful include the IRS’s Withholding Calculator, Form 1040-ES, and Publication 505.
3) New Wrongful Levy/Seizure Time Limits
The new time limit for filing a seizure and wrongful levy suit and making an administrative claim has been increased to 2 years.
4) New Deduction Rules for Fringe Benefits
There are a number of deduction changes for fringe benefits that may impact employee deductions and a company’s bottom line, including:
Reimbursements for Bicycle Commuting
Qualifying reimbursements for bicycle commuting can now be deducted as business expenses and the exclusion of qualifying reimbursements from the income of employees has been suspended until 2025.
Moving Expenses
There is a new requirement for employee wages to include reimbursements for moving expenses, with the exception of U.S Armed Forces active duty members.
Achievement Awards
When an achievement award is tangible personal property, an employee may exclude it from their wages and, with some limitations, employers can deduct the award.
Transportation Benefits
Deductions are no longer allowed for commuting transportation provision or qualifying transportation fringe benefit expenses, with the exception of where it is required for safety.
5) Different Business Deductions
The Tax Cuts and Jobs Act introduces many revised and new business deductions, including:
Payments & Fines
Certain penalties for breaking the law and some payments that are made in cases involving sexual abuse and harassment are no longer deductible. Business payments made to a charity or the government, where the taxpayer is given local or state tax credits, can normally be deducted.
Qualified Business Income (QBI) Deduction
Eligible taxpayers can receive a new QBI deduction from qualified businesses or trades. There are two components to the deduction:
1. QBI Component: An amount up to 20% of QBI may be deducted by eligible taxpayers from S corporation, estate, trust, partnership or sole proprietorship operated domestic businesses. There are some limitations to the deduction – including trade type and amount of paid W-2 wages – for taxable incomes above $157,500 or $315,000 for married couples.
2. Real Estate Investment Trust (REIT) & Publicly Traded Partnership (PTP) Component: Some taxpayers will be eligible for a combined 20% deduction of qualified PTP income and qualified REIT dividends.
The deduction is normally the lesser amount of the first component, and either 20% of taxable income (minus the net capital gain) or the second component.
Entertainment & Meal Expenses
Entertainment, recreation, and amusement expense deductions have been removed. Under certain conditions, meal expense deductions of 50% are still allowed.
Net Operating Loss (NOL)
For many taxpayers, NOL carry-back is no longer possible. With some exceptions, the only option is to carry forward NOLs occurring in the 2018 tax year and onwards. For these years, NOL deduction has a taxable income limit of 80%.
Excess Business Loss
The new law has introduced loss limitations for some non-corporate taxpayers. Excess business losses relate to the total amount that all deductions from an individual’s businesses and trades exceed gross income and gains, in addition to either $250,000 for individual returns or $500,000 for joint returns. Disallowed excess business losses carry forward to the next taxable year.
6) Changes to Business Accounting
There are three important accounting method changes under the new law:
Like-Kind Exchanges
With an exception outlined in a new transition rule, loss and gain deferral is possible only in relation to real property exchanges, which must be for investment or used productively.
Small Businesses
Cash accounting may now be used by taxpayers of small businesses when their annual gross receipt averages are below $25 million over a period of three years. The small businesses are also exempt from some rules for accounting.
S Corp to C Corp Conversions
Where the corporation is eligible, the section 481(a) 6-year adjustment period must now be used by terminated S corporations after certain revocation circumstances.
7) Business Tax Credit Changes
The two highlights of business tax credit changes, are:
- Rehabilitation tax credit changes in relation to how much taxpayers incur or pay for qualifying expenditures. The time allowed for prorating the 20% certified historic structure rehabilitation credit has been extended to 5 years and the 10% credit for buildings that were in service prior to 1936 has been revoked. There’s also a new transition rule that gives owners of certified historic structures and properties constructed before 1936 relief.
- New employer credits that apply to paid medical and family leave. These are based on a percentage of the wages – up to a total of 12 weeks in the taxable year – that are paid to eligible employees on leave.
Contact APA Financial Services for Tax Advice and Services in Chicago
The latest tax law introduces may changes, but you don’t need to process everything alone! APA Financial Services are on hand to help you navigate tax reforms and implement any necessary changes to your business.
Whether you need assistance with tax management, planning, preparation or advice, we have the services and experience to assist you. Contact APA Financial today to learn more about the changes introduced in the Tax Cuts and Jobs Act and how they impact your business.
