5 year-end tax tips to share with small business owners

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The last few weeks of the year can be a stressful time both personally and professionally for everyone, including small business owners preparing for both the New Year and the tax year. This is especially so in a year when there is so much lingering uncertainty around federal regulations and the tax code.

Fortunately, small business owners can rely on you and your team to guide them through the current regulations and explain how the potential of upcoming changes may impact their business. But while you’re always there to answer questions and share tips, a proactive approach in providing business owners information on key issues in advance of tax season can help them take control of their business plans and save you time as you too work diligently to close out the year.

Here are the top five tax regulations identified by Paychex that may be helpful to small business owners as they look ahead to 2018:

1. Tax reform: Both the House and the Senate have passed tax reform legislation, and the conference committee reconciliation bill is coming up for a vote this week. Based on regulations in both legislative chambers’ plans, accelerating deductions where possible would allow these deductions to be taken at current rates, which in general, would be higher than subsequent years if tax reform legislation passes. Similarly, deferring business income, where feasible under accounting methods, would allow the income tax at a future rate, which is anticipated to be lower when tax reform legislation is enacted.

2. Affordable Care Act filing: Though there was much conversation around health care in 2017, the ACA remains the law of the land, and therefore it’s important for small business owners to remember that if their business is defined as an “applicable large employer” (ALE) in the Employer Shared Responsibility (ESR) provision of the ACA, they must again provide a detailed reporting of healthcare coverage. Unlike previous years, there is no transition relief for how an employer files or offers coverage, so to avoid substantial penalties, employers should do their due diligence in reporting timely and accurate information on Forms 1094-C/1095-C. Additionally, while you’re aware of the recent Internal Revenue Service communication on healthcare coverage reporting for the individual mandate, and recent updates on the IRS ESR question and answer site, your clients may not be. Remind owners that they may begin to receive notices of a potential assessment for 2015 in late 2017, meaning they may need to research these notices, correct any errors in previous filing, and communicate with the IRS while also preparing for current year obligations.

3. Accelerated W-2 form filing: For tax year 2016, the first year of the accelerated due date for W-2 filing, the Social Security Administration indicated that the number of late W-2s filed almost doubled compared to the previous year, and the number of corrections filed on Form W-2C increased more than 30 percent from last year. Employers should ensure all W-2s are submitted by the accelerated deadline (January 31, 2018) to avoid late or non-filing penalties assessed by the IRS. For tax year 2017 filing, seven additional states (Arizona, Arkansas, Kansas, Maine, Missouri, Montana and Nebraska) will be following the federal example and have accelerated their W-2 filing deadline to Jan. 31. This brings the number of states requiring accelerated W-2 filing to a total of 35.

4. 401(k) tax credit: The Credit for Small Employer Pension Plan Startup Costs, which provides a tax credit for eligible employers who start a 401(k) plan, is again available to employers with no more than 100 employees who received at least $5,000 in compensation for the tax year. The credit, up to $500 per year for the first credit year and each of the following two tax years, is eligible to offset the costs of establishing an eligible plan as well as educating employees about the plan.

5. Qualified Small Employer Health Reimbursement Accounts: Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) provide non-ALE small employers that do not provide group health coverage a method to reimburse employees for the cost of individual insurance, and/or qualified medical expenses, on a pre-tax basis. The programs require the benefit be provided to all eligible employees, have a notice requirement, and allow only employer contributions to a statutory maximum amount.

Sharing these important tax considerations with your clients will help them make informed decisions as they close out 2017, even with many lingering tax code unknowns, and will solidify you as a trusted advisor as they work toward the primary goal of growing their business.

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Tax planning Tax reform Trump tax plan Obamacare ACA reporting Small business 401(k) Payroll Tax records Paychex