Tax Reform Opportunities for Your Small Business
While the new federal tax code can be intimidating and overwhelming for many small business owners, the good news is this: there are many opportunities for your small business from the reform. In this Tally Services blog, we’ll cover some of the most exciting tax reform opportunities for your small business!
If your business maintains $25 million or less in yearly gross receipts, you are very well likely able to take advantage of the many of the new small business taxpayer safe harbors built into the new system. These changes are designed to help your business simplify your tax filings and generate tax savings that could be significant for your business!
If you aren’t already, it’s time to take advantage of the tax reform opportunities for your small business in the new Tax Cuts and Jobs Act (TCJA). Opportunities include:
UNICAP
Under the new tax laws, small businesses with $25 million or less in gross receipts are now exempt from standard UNICAP rules. UNICAP, or uniform capitalization, refers to the standard costs that a business must capitalize related to their current inventory. The benefit of this exemption for small businesses is that you now have the ability to deduct capitalized costs that you would not have been able to previously deduct. Small businesses can also now stop completing the 263A section of their tax forms. Depending on your business and inventory levels, this could be both a huge time and cost saver.
Cash Method Expansion
Under the new TCJA, many more businesses will now be eligible for the Cash Method Expansion. This means small businesses can now increase the current $5-10 million average gross receipt limit for cash-basis taxpayers to $25 million. Overall, this new measure will simplify tax return preparation and gives businesses the ability to avoid recognizing income until the cash has officially been collected.
Inventory Accounting
For businesses with $25 million or less in gross receipts, under the new TCJA system, businesses now have the ability to treat inventory as non-incidental materials or supplies. This will work to simplify the inventory tracking and calculation, while also giving businesses the opportunity to immediately deduct costs previously capitalized.
Long-Term Contracts
Under the new TCJA system, businesses will now be able to defer recognizing revenue from long-term construction contracts. With this new stipulation, the “small contractors” exception has been increased from $25 million in average gross receipts with the Percentage-of-Completion method (PCM).
If you have questions about the new Tax Cuts and Jobs Act and how it will affect your small business, please contact Tally Services. We are here to help you understand the changes and how your business can take advantage of these and other tax opportunities under the new system.
Tally Services, an accounting firm in Fort Collins, Colorado, partners with businesses and organizations of all sizes to provide bookkeeping and accounting services to help your business adapt in light of the changes. Click here to learn more about our services, and don’t hesitate to contact us if you need help.