Women’s Venture Fund

Small Business – Important Tax Dates in 2018
February 1st – Deadline to send out your employees’ W-2 statements; and contractors’ 1099s

March 15th – Deadline to submit 2017 S-corp tax forms (1120S); and partnership tax forms (1065)

April 17th – Deadline to submit 2017 C-corp tax forms (1120); and individual tax (forms 1040 series). 

Note: April 17th is also the deadline to register your business as an S-corporation for the year 2018. Check if structuring your business as an S-corp can reduce your tax liability.

Taxes most often encountered in small business operations
Other than income tax—tax on your net income—these are the general types of taxes:

  • Estimated taxes: These are taxes you pay throughout the year against the income you expect to make by the end of the year.
  • Employee taxes: This includes federal income tax withholding, social security, Medicare taxes and federal unemployment tax. Failure to pay these taxes carry very stiff penalties.
  • Self-employment taxes: Independent contractors must pay self-employment taxes on earnings exceeding $400.
  • Excise taxes: These taxes apply to certain industries or specific products and services such as gasoline, tobacco and alcohol, indoor tanning services and sport fishing equipment—activities and services that are generally deemed to be harmful to health or to the environment but perfectly legal to engage in.

WVF always strongly recommends that entrepreneurs work with accountants or tax attorneys to not only ensure compliance to tax regulations but to take advantage of current deductibles and tax strategies to lower their tax bill.

Start this year with smart strategies to save on taxes for 2018 
Working with your tax professional, you can save big on your business taxes next year by adopting sound strategies in 2018.  

#1: Have a discussion of how the PATH Act can favorably impact your taxes. This act was initiated in 2015 but is petering out se Section 179 deductions. It’s a tax code that allows businesses to deduct the entire price of a wide range of equipment and software purchases, financed or leased by December 31st of this year. The list of qualifying equipment and software is very inclusive; and the ceiling for this deduction is currently $500,000.  this year. Some eligible deductions include:

  • Any vehicle used for business purposes.
  • Property used in manufacturing, transportation and
  • The lease of any type of facility used for business or research.
  • Off-the-shelf computer software.

#2: Another write-off option is bonus depreciation.

While you can’t deduct more than the purchase price of a new (not used) item, this option allows you to take deductions up to 40%. (The ceiling was 50% for 2015-2017; and will drop to 30% in 2019; and to zero in 2020.)  New items include: 

  • Computer systems and software
  • Machinery
  • Equipment
  • Office furniture

Using both of the above options yields an even better tax advantage! You can claim a current-year write-off for a new or used heavy SUV which costs $25,000 (maximum) this year; and then claim a 40% first-year bonus depreciation when filing taxes for 2018.

 #3: If you can, defer a portion of taxable income in the fourth quarter. Ask your client/payer to hold off mailing in payment until January 2019. However, be careful not to put yourself into a higher income tax bracket.

#4: Prepay recurring bills/account payables before Dec. 31 to increase your expenses. Examples of such expenses are insurance policies,  rent and office supplies—as long as you comply with the 12-month rule. This rule states that the economic benefit from the prepaid expense cannot extend beyond the end of the next tax year or a year after your business realizes the tax benefit of the expenditure —whichever is earlier.

Tax laws are complex so make sure an expert is at your side.