If you own a small business, then you are in luck as the government just announced that they will be introducing substantial tax breaks for small businesses. However, in an unfortunate twist, this tax break only applies to a very small amount of businesses, and CPAs are warning that it may be extremely difficult to uncover whether your company will be able to reap these benefits.
New legislation was introduced that will provide these extra write-offs, but they will only apply towards businesses with qualified business income. As a result, it is extremely difficult for tax attorneys to discern what activities will enable businesses to pursue this additional income.
The Internal Revenue Service attempted to provide businesses with additional clarifications in January, but with the government shutdown, much of the uncertainty continues to persist. On the most basic of levels, businesses will receive the full deduction if it is run by owners who are married, file jointly, and whose income does not exceed $315,000. According to these rules, more than 90-percent of small businesses would qualify for this deduction. However, there are a mind-numbing amount of factors that further complicate this already hard to understand legislation.
Factors such as whether you pay your employees, own the real estate upon which your business is situated, keep separate books and bank accounts, along with many more elements in the fine-print can stop you from gaining these lucky breaks. Furthermore, businesses in health, financial services, consulting, entertainment, and law will be excluded from these deductions.
Inherent to this legislation is a number of grey areas and anomalies that could be loopholes for businesses to gain the breaks. Many CPAs are warning that IRS employees will have to make judgment calls that could vary substantially. For entrepreneurs, this could be a gut-wrenching time to file taxes, and no clear resolution is in sight.
There are so many questions that CPAs do not have answers to, and with the legislation the way it is, many answers will not be revealed until after the tax season has passed. As a result, many businesses may be unable to gain this life-life-changing break that could significantly alter the course of their company.
Overall, until more light is shed onto this legislation, it is anyone’s guess as to whether your business will be able to apply for this tax break. In the meantime, CPAs are hoping that the IRS will release more information that will further elucidate the situation.