Small businesses: Watch for these two pieces of tax reform

The current administration has pushed for tax reform, touting the need to reduce taxes and remove barriers to economic growth. In theory, this sounds great. In reality, it could cause problems for small businesses.

The many problems are outlined in various news sources. A piece out of the USA Today Network focused specifically on small businesses. Two specific notes from the piece that are areas for small business owners to watch within the current tax reform proposal include:

• Corporate tax. A corporate tax reduction will likely benefit large businesses, not small businesses. Small businesses that are incorporated as sole proprietorships and limited liability companies (LLC) do not generally pay this tax. As such, they will not benefit from its reduction.
• Pass-through tax. Instead of paying the corporate tax, the small businesses noted above generally pay the pass-through tax. This is because the taxes from the business generally “pass through” and are paid based on the owner’s personal income tax rate. Small businesses that may benefit are those with a pass-through tax rate of 15 percent or more.

So what can you do to make sure these proposals do not negatively impact your small business? The first step is to be aware of the changes. Watch the proposals as they work through the system. If you find your business involved in a tax dispute, it is wise to seek legal counsel. Whether the issue involves an audit, worker classification concern, dispute over valuation or other legal issue, an experienced tax law attorney can help. This professional will advocate for your business interests and work to better ensure a favorable outcome.