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