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In a recent interview, accountant Michael J. Berger, managing partner of Michael J. Berger & Co in Ronkonkoma, NY, warned business owners about the 20% pass-through deduction and missing filing deadlines. For more information please visit http://www.bergercpa.comWhen asked to comment, Berger said, "Many business owners were excited to learn about the qualified business income deduction, which allows a deduction of up to 20% of income. Here are a couple of important things to know when planning for the deduction.”
He added that the deduction – which will go into effect the next tax season – applies for pass-through entities such as S Corporations, partnerships, and sole proprietorships.
Business owners should first find out if they are even eligible to claim the 20% income deduction on their tax returns.
When asked to explain, he said, “This deduction is aimed at smaller businesses. If you have a high income and don't pay wages for other employers by filing W2 forms, then you're not eligible for the deduction."
The other thing that small business owners need to know, Berger says, is how much they can claim under the 20% pass-through deduction.
He added that the general rule of thumb is that the higher the individual’s income, the lower the deduction.
“The stipulation for the new deduction states that owners could claim ‘as much as’ 20% of their income. It’s a bit complicated to calculate exactly how much you can save through this deduction. For instance, if you’re a business owner who files as a single taxpayer and receives more than $207,500 annually, then you’ll only be able to deduct 50% of W2 wages,” he said.
Berger added that the best thing to do is to contact a professional accountant who will provide an accurate picture of potential tax savings under the new tax code.
Business owners should also practice caution if they've been advised to restructure their company to meet eligibility requirements for the deduction.
When asked to elaborate, he said, "Because the pass-through deduction requires that businesses file W2 forms, accountants around the country have advised companies to convert into S Corporations. However, submitting W2 forms can be tricky.”
"The IRS has strict guidelines in filing W2 forms; if not followed, there are heavy monetary penalties. Furthermore, if you file a W2 form incorrectly, then you will no longer be eligible for the 20% pass-through deduction,” he commented.
Source: http://RecommendedExperts.biz
Contact Info:
Name: Michael Berger
Email: Send Email
Organization: Michael J Berger & Co CPA's LLP
Address: 3425 Veterans Memorial Hwy, Ronkonkoma, NY 11779, USA
Phone: 631-471-3400
Website: http://www.bergercpa.com
Source URL: http://RecommendedExperts.biz
Release ID: 378267
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