Help You to Prepare 2018 Taxes, Tax Changes for Small Business

Help You to Prepare 2018 Taxes, Tax Changes for Small Business

By John Wolf December 2018

Current Changes in Small Business Tax And Prior Year Changes

Help You Prepare 2018 Taxes, Tax Changes for Small Business

Current Changes in Small Business Tax – And Prior Year Changes

Tax laws and specific IRS regulations can have yearly changes that affect small businesses

I will describe you the most recent changes for you to plan your taxes and be prepared for this year.

You can read here about the payroll tax and some other business changes for the year 2018 that you will need to remember when you prepare your tax return.

You will see the changes:

  • Social Security maximum.

  • Mileage rate of the IRS

  • New Medicare raises of tax for self-employed.

Business Tax Changes – Effective Dates

This is the information for 2018 tax-year that is due to be paid at the year 2019

December 31, 2018, is the last day of the current tax year (2018), for sole owners filing company tax returns on Schedule C and for partnerships with S corporations.

Corporation tax filing may be different, according to the date the fiscal year is ended.

Different business types have the Federal income tax due date on the following dates.

  • The sole proprietors and single-member LLC’s on Schedule C: April 15, 2019

  • The partnerships and S corporations: March 15, 2019

  • Corporations are: April 17, 2019

When the date is falling on a weekend or holiday, they will move to the first weekday after the holiday or the weekend day.

The dates reflect the changes for due dates that fall on a weekend or holiday. In these cases, the due date for that year is the first weekday. See IRS Tax Calendar for Businesses and Self- Employed,     on business tax return due dates.

2018 Personal and Business Tax Rates

For the year 2018 individual income tax rates (for pass-through businesses that pay business taxes on their returns)

The levels start at 10% and gradually increase to 15%, then 25%, then 28%, then 33%, then 35%, and finally reaching a top rate of 39.6%. These rates are in effect through 2025.

Thnew tax law made at the end of 2017 changed 2018 corporate income tax rate to a flat 21 percent for all corporations, effective on January 1, 2018, and after.

Business Mileage Rates

The IRS regular mileage rate has changed for 2018. Below are the rates:

  •  Cents per mile for business miles 54.5 

  • Cents per mile for medical or moving purposes 18 

  • Cents per mile drove in service of charitable organizations 14 

About businesses taking the standard mileage deduction. These rates are in effect for the whole year.

The standard mileage rate or actual expenses can be chosen to deduct by businesses

The mileage you drive makes a difference. If you drive less than 50% for your business, you better want to use the standard rate, but driving over 50% for your business purposes, It will be better to choose to add actual expenses. Read more about Standard Mileage vs. Actual Expenses: Getting the Biggest Tax Deduction

Social Security Maximum

The Social Security tax rate remains the same. $127,200 is the maximum amount of salaries on which withholding is based for 2018.

The new maximum affects the employees and the owners that have to pay tax as self-employed.

When a business owner has two sources of income, one is a business, and another is an employee. The salary from the employment will be considered the first and the self-employment the second.

 Medicare Additional Tax 

Starting with 2013 tax-year and continuing through 2017, Medicare tax rate of was added, and 0.9% is applied to combined employment and self-employment according to this levels:

  • $250,000 for married filing jointly – 

  •  $125,000 for Married filing separately.

  • $ 200,000 for Single

  • $200,000 for the head of household (with qualifying person) 

  • $200,000 for qualifying widow(er) with dependent child 

Above $200,000 the additional tax should be withheld from employee payroll. For business owner that are self-employees, this additional Medicare tax will be included in self-employment.

Increases in Depreciation Deductions

The Congress approved two accelerated depreciation benefits for businesses

Section 179 for deductions on purchases of business assets

Will increased deductions

    • Deductions up to 500,000 per year on behalf of Section 179 will allow your business to purchase and deduct new equipment or assets intermediately and not waiting for depreciating over some time.

Bonus depreciation was reinstated, it will be phased out over the coming years, as an incentive to businesses for purchasing new equipment and replacing old equipment. The 

    • amount of bonus

depreciation is 50% for 2015, 2016, and 2017, reduced to 40% for 2018 and 2019.