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Last-Minute Questions to Ask Your Tax Professional

Last-Minute Questions to Ask Your Tax Professional

By | 02.08.18
Last-Minute Questions to Ask Your Tax Professional

Anyone who thinks filing your federal tax return is confusing has never owned a local business. Because if you think figuring out your personal taxes is hard, the added complexities of filing taxes on business income will all but blow your mind.

We started preparing you for tax season with 8 Small Business Tax Tips earlier this year. As the deadlines for filing get closer, let’s go over some common, last-minute questions you may have for your tax professional.*

The New Tax Law’s Pass-Through Deduction

Under the new tax law, there’s a flat corporate tax rate of 21%. However, sole proprietorships, partnerships, limited liability companies and S-Corporations will claim a 20% deduction of their pass-through income (with some limitations of course). What limitations, exactly? Here are two of the big ones.

Q: I read that income for owners and partners of pass-through entities qualifies for a 20% deduction, but only for domestic businesses. Does mine qualify?

A: They key word here is “domestic.” Only pass-throughs that work and sell your product or service in the United States are considered domestic.

Q: If some services businesses can’t qualify for the 20% pass-through deduction, how do I know if mine is in that category?

A: These services businesses include health, law, accounting, actuarial sciences, athletics, consulting, financial and brokerage services, as well as the performing arts. The kicker here is that if your line of work doesn’t fall neatly into one of these categories, you could still be eligible.  Check with your tax professional if you think you may be in the gray area. A gray area example: Your business provides lab tests and blood work. Technically you’re in healthcare, but you don’t actually administer any care.

What Else Can I Deduct? Don’t Forget These Business Expenses

Feel like you’re forgetting something? Here are a couple common business expenses that may qualify you for additional deductions.

Q: Can I deduct my car as a business expense? How?

A: Yes, if you use your personal vehicle for your business, you can deduct expenses related to it. You can calculate this based on 1) mileage, or 2) actual car expenses.

If you choose to deduct based on mileage, multiply the business-related miles you put on the vehicle in the 2017 tax year by the standard rate of 53.5 cents per mile. In order to do so, you must have kept a mileage log tracking which mileage was for personal use and which was for business. (Thinking about doing this next year? There’s an app for that.)

If you deduct actual car expenses, you’ll need to total up your expenses like gas, tolls, insurance and repairs, and multiply that number by the percentage of time you used the car for work.

Q: Which meals can I deduct?

A: This one’s a pretty easy-to-remember rule. Deduct 50% of meals you consider business-related. Additionally, if you take the time to categorize meals that you had on business travel or which were for employees, these can qualify for a 100% deduction. The caveat? Make sure they’re not all surf ‘n turf specials from your favorite steakhouse, or as the IRS would put it, “lavish or extravagant.”

Nothing Replaces Professional Tax Advice

*Hopefully these questions and answers will help you button up your taxes before you file. Remember, we provide small business advice, but this advice should not replace or override that of a tax professional’s, like your bookkeeper or accountant.

Get Ready for Next Year

One of the biggest hassles of tax preparation is collecting and managing your financial statements, as well as important files like estimates, invoices and receipts. So if you keep these in a separate place from where you track and process payments, you’ll create a lot of confusion for yourself (and your busy, busy accountant) come this time next year.

Be better prepared (and better liked by your tax professional) with a tool like Thryv. Our flexible technology brings file management, payment processing, 2-way financial communications and interactions all under one roof. Check it out, and save yourself some serious headache.

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