As we approach the festive season and the year comes to an end, it’s vital that small business owners prepare estimates for taxes.Alternatively, we at HWB Services Inc. prepare your estimations so that there are no surprises and we maximize deductions. All 2018 personal income tax returns are due by Monday, April 15, 2019. For you to prepare for tax returns, you have to be aware of the changes that were made in Congress.There are seven rates in total, and the amount of tax you owe depends on your income level and filing status. These tax changes signed into law by President Donald Trump were effective from January1, 2018, and they will be active until 2025 if Congress does not vote to extend them.
There were quite a few changes to keep track of, but wehave highlighted some of the more salient points you should consider whenfiling.
- Analyze your filing status
It is a known fact that your status can affect how much you owe in taxes. It is important to consider whether your filing status will change during the year or not.
For instance, if you are single but planning to welcome a little bundle of joy or add another dependent by December 31, 2018, you might want to change your status from single to head of household.
- Look at your 2017 return.
Last year’s tax return can provide a forecast for this upcoming year if your job position and subsequent salary have remained somewhat static. However, deductions and variables such as income from stocks, purchasing equipment for your company, and depreciation of assets should all be examined for the respective cost and savings.
- Be aware of the tax that you want to be withheld.
In 2017, the average refund for 2016 returns was$2,782. If you got a refund that wasn’t in line with your preference, it could mean that you have elected unnecessary withholdings.
If withholding is overdone, it could mean a larger tax refund in April 2019. However, should your elections be improper they can lead to penalties for failing to estimate your taxes accurately.Don’t worry; we can help you with this!
- Running your own business doesn’t mean quarterly taxes.
A few HWB Services Inc. clients were previously paying quarterly tax estimates because they thought they had to do so in order to avoid penalties that their small business couldn’t afford in the first place!However, quarterly payments are not always necessary. Feel free to email us your questions about this one because we know it can be quite tricky!
- Understand what business filing is best for your business.
Below are 2018 filing rates and brackets organized by status for a point of reference.
The Tax Cuts and Jobs Act that was signed by Donald Trump in December 2017 came with some changes that you might want to familiarize yourself with so that filing your taxes this year can be a better experience for you. It may even benefit your business most as an entrepreneur or small business to file as an S. Corp versus an LLC. There were quite a few changes to tax law from theTrump administration, and we believe that many of our clients will benefit from those adjustments this upcoming filing.
Head of Household
| Taxable Income | Tax Rate |
| $0 – $13,600 | 10% of taxable income |
| $13,601 – $51,800 | $1,360 plus 12% of the amount over $13,600 |
| $51,801 – $82,500 | $5,944 plus 22% of the amount over $51,800 |
| $82,501 – $157,500 | $12,698 plus 24% of the amount over $82,500 |
| $157,501 – $200,000 | $30,698 plus 32% of the amount over $157,500 |
| $200,001 – $500,000 | $44,298 plus 35% of the amount over $200,000 |
| $500,001 or more | $149,298 plus 37% of the amount over $500,000 |
Married Filing Separately
| Taxable Income | Tax Rate |
| $0 – $9,525 | 10% of taxable income |
| $9,526 – $38,700 | $952.50 plus 12% of the amount over $9,525 |
| $38,701 – $82,500 | $4,453.50 plus 22% of the amount over $38,700 |
| $82,501 – $157,500 | $14,089.50 plus 24% of the amount over $82,500 |
| $157,501 – $200,000 | $32,089.50 plus 32% of the amount over $157,500 |
| $200,001 – $300,000 | $45,689.50 plus 35% of the amount over $200,000 |
| $300,001 or more | $80,689.50 plus 37% of the amount over $300,000 |
Married Filing Jointly or Qualifying Widow(er)
| Taxable Income | Tax Rate |
| $0 – $19,050 | 10% of taxable income |
| $19,051 – $77,400 | $1,905 plus 12% of the amount over $19,050 |
| $77,401 – $165,000 | $8,907 plus 22% of the amount over $77,400 |
| $165,001 – $315,000 | $28,179 plus 24% of the amount over $165,000 |
| $315,001 – $400,000 | $64,179 plus 32% of the amount over $315,000 |
| $400,001 – $600,000 | $91,379 plus 35% of the amount over $400,000 |
| $600,001 or more | $161,379 plus 37% of the amount over $600,000 |
Single
| Taxable Income | Tax Rate |
| $0 – $9,525 | 10% of taxable income |
| $9,526 – $38,700 | $952.50 plus 12% of the amount over $9,525 |
| $38,701 – $82,500 | $4,453.50 plus 22% of the amount over $38,700 |
| $82,501 – $157,500 | $14,089.50 plus 24% of the amount over $82,500 |
| $157,501 – $200,000 | $32,089.50 plus 32% of the amount over $157,500 |
| $200,001 – $500,000 | $45,689.50 plus 35% of the amount over $200,000 |
| $500,001 or more | $150,689.50 plus 37% of the amount over $500,000 |