levels of liability, reporting requirements, and tax implications. The most common types of business structures are the sole proprietorship, partnership, limited liability company, and corporation. Keep in mind that your needs can change over the years, so just because one business structure has served your needs in the past does not mean it is still the best option for you. Consult a business attorney in your state for specialized advice. Regardless of which business entity you chose, any of them are allowed to deduct expenses. You should not limit your business deductions to just rent, office supplies, and salaries paid to your staff. Travel, meals, and entertainment expenses can also be written off if they are incurred while pursuing a clear business purpose. In addition to airfare and hotel costs incurred traveling to conferences and meetings out of town, mileage can be a big expense for business owners. Make sure you keep track of mileage traveled from your office to client meetings and temporary work locations. Commuting expenses from home to work, however, are not included. Travel logs can be helpful here. Your log should include the starting point and destination, business purpose for the trip, and the total number of miles. For meals and entertainment, you should keep notes on who attended the meal or outing, the business purpose, and what was discussed.
Each tax year stands on its own
Keep in mind that tax law can change each year. Each year must be viewed separately. This will be particularly important for the 2018 tax year since we have a new tax plan. The plan includes various changes for individuals and businesses. Some of those changes are as followed:
Changes Affecting Individuals
• While the number of tax brackets have remained the same, the rates have changed. Worth noting, the highest tax rate has decreased from 39.6 % to 37 %. For most taxpayers, their tax rate will be lower under the new plan.
• The standard deduction is now going to be double the amount it has been in previous years. For many taxpayers who have previously itemized their deductions, they may now start taking the standard deduction because it is more beneficial.
• The mortgage interest deduction is a popular itemized deduction for homeowners. Previously, you could deduct mortgage interest payments on mortgages with principle amounts up to $ 1 million. Under the tax plan, the principle amount is limited to $ 750,000.
Changes Affecting Businesses
• The most widely discussed change has been the lowering of the corporate tax rate. Previously, the tax rate for corporations was 35 %. The new tax rate going forward will be 21 %.
• Capital investments are purchases that are designed to last more than one year. Typically, you have to capitalize the purchase price based on how many years the property should be operational and useful in the business and how quickly the property should be capitalized. Beginning in 2018, you will be allowed a full deduction of the purchase price for capital investments designed to be used for five years.
Know when you need to hire a tax professional
Your clients come to you because you are an expert in your area of law. Ensure they get the tax expertise they need when an issue arises – consult with a tax professional about the tax consequences of their legal transactions. This pertains to your personal and business affairs as well. The Internal Revenue Code can have complicated implications for individuals and businesses. Taxpayers are reluctant to consult a professional and have a tendency to want to cut corners; however, you want to resist the urge. A tax attorney or CPA can ensure your return is prepared accurately, give you the appropriate advice on how to withhold taxes and make adequate tax payments to the IRS throughout the year, and save you the headache of paying more money in the long run in the form of penalties and interest. Additionally, in some cases the actual amount you spend on tax preparation services is deductible on your return the following year. ▪
The Official News Publication of the Atlanta Bar Association THE ATLANTA LAWYER 13