The new tax law, and in particular a new deduction aimed at small business owners, is making this income tax filing season more complicated than usual.
The deduction aimed at giving tax breaks to sole proprietors, partners and owners of S corporations allows many of them to deduct 20 percent of what’s called qualified business income. But which business owners can claim the deduction, and how much they can claim, involves a lot of interpretation and complex calculations, tax professional say.
Some tips for making this filing season a little easier:
— Get on your CPA’s calendar soon. Tax pros always advise clients to see them early in tax season, but it’s even more important to do so this year. CPA Steven Wolpow advises business owners to have those meetings by the end of February. Even if owners don’t have all the necessary documents, they should meet with tax advisers to get a sense of where they stand, says Wolpow, managing partner with Nussbaum, Yates, Berg, Klein & Wolpow in Melville, New York. If documents like 1099s are still outstanding when returns are due, it’s time to get an extension of the filing deadline.
Owners should be sure their records are in order before they give them to their advisers. The more time a preparer spends trying to sort out all the numbers, the more expensive it will be for an owner, Wolpow warns.
— Expect to do more of the work this year as your tax pro determines whether you can claim the deduction. “They’re used to giving us the information and letting us figure it out. They’re going to have to be very involved as well,” says Angela Dotson, a CPA with Aprio in Atlanta.
— If you’re a do-it-yourselfer and don’t use a paid preparer to compile your return, don’t be in a rush to file. The creators of tax preparation software are also still figuring things out and may amend their products before the filing deadlines. That will change the calculations for some owners, Dotson says. Owners who do the work themselves should consider asking a tax pro to look over the return — the investment in their fee may save you from costly mistakes.