The new tax law has eliminated or limited some popular business deductions including those for entertainment expenses and interest on loans and credit lines. Tax professionals predict this filing season is going to be more complicated and painful as business owners see how much money they can no longer deduct.
The lost deductions also include subsidies for employees’ transit and parking costs and what’s known as net operating loss carrybacks, which allowed companies to get a refund on taxes paid in previous years when they suffer a loss on their operations. But many owners may be unaware of the lost deductions because they don’t focus on taxes for much of the year while running their businesses, says Leon Dutkiewicz, a certified public accountant with Citrin Cooperman in Philadelphia.
Dutkiewicz notes that businesses got new tax breaks under the law, including lower tax rates and a 20 percent deduction in income for many sole proprietors, partners and owners of S corporations.
“You can argue that it’s kind of an offset,” he says of the lost deductions.
Owners who want to learn more about the lost deductions can find information on the IRS website, www.irs.gov :
— The IRS issued a notice in October detailing the changes in deductions for meals and entertainment. You can find it at https://bit.ly/2t2TnlB . The agency has not yet updated its Publication 463, Travel, Entertainment, Gift, and Car Expenses, on its website for 2018, but the IRS has said taxpayers can rely on the guidance in its notice when compiling their returns.
— The IRS put together questions and answers about new limits on deducting business interest; you can find it at https://bit.ly/2Bubh5t . It has updated its Publication 535, Business Expenses, to reflect the changes for 2018.
— Publication 535 explains the elimination of the deduction for employees’ commuting costs but notes that if an employer is paying for transit or parking to ensure the safety of employees, the deduction can still be taken.
— The IRS has a brief explanation of the end to net operating loss carrybacks at https://bit.ly/2SxW7pz .
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This article provided by NewsEdge.