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What's New in Regards to the Tax Reform Publication 5318?

Just to let you know, you should be aware of the changes regarding Tax Reform Publication 5318. If you are involved in the business world, these changes could profoundly impact you. There are also new requirements that you must follow to file your return.

Tax Cuts and Jobs Act changes affect business taxes. As a business owner, you must understand how the Tax Cuts and Jobs Act (TCJA) will affect your business. The law enacted in December 2017 will change several tax laws that affect business owners. This article provides an overview of the critical changes that companies may experience.

Among the most notable changes that TCJA will bring is the corporate income tax rate reduction from 35 percent to 21 percent. In addition, TCJA will also cut the top individual income tax rate from 37 percent to 29.6 percent. These changes are not just crucial to individuals, and they are also critical to small and medium-sized businesses, including partnerships and sole proprietorships.

For example, the TCJA will allow taxpayers to deduct up to 20 percent of their qualified business income. The new deduction is effective for amounts paid after December 31, 2017. It is also temporary. Several businesses that could benefit from the deduction include pharmaceutical companies and those that sell products overseas.

There are also some changes to the business interest deduction. Businesses will no longer be able to deduct interest over 30 percent of their adjusted taxable income. However, they can still deduct the total amount of interest they have already paid. They can also reinvest cash in their business. Some businesses will hire employees or buy equipment. Others may use the money to pay dividends or reduce debt.

Another area of concern for businesses is the TCJA's deemed repatriation tax. This is a tax on earnings earned from foreign affiliates. During the previous year, US companies estimated they had held $2.6 trillion in untaxed earnings in foreign affiliates. TCJA will require domestic corporations to hold a 10 percent stake in a foreign company to avoid paying a deemed repatriation tax.

In addition to reducing the corporate tax rate, the TCJA includes several revenue-raisers. For example, a SALT deduction cap is in place. Also, the TCJA will set a blended tax rate that applies to the total amount of business income.

As a result of TCJA, businesses will be subject to several changes during the next four years. These changes are designed to encourage more investment. Ultimately, these changes can affect how a business evaluates its value. Therefore, experts should assess whether they have adequately factored in the changes to the business tax code.

Some of the TCJA changes will impact the cost of capital. Companies that transition from equity financing to more debt may find that the overall cost of capital will increase. A firm's cost of capital is a crucial part of valuing a business under the income approach.

Another concern for businesses is that the TCJA will limit the ability to deduct net operating losses. Under the previous law, a company could carry out unused losses for up to two years. But the TCJA will allow a business to carry back only 80 percent of its net operating loss for tax purposes.

Requirements for filing

The Tax Cuts and Jobs Act of 2017 have been around for a while now, but it may be a while before you're caught up to speed on the new tax laws. Whether you're an established business, a first-timer, or a tax professional, you need to keep abreast of what's new. Luckily, the IRS has several helpful tools, including publications, forms, and even IRS mobile apps, to help you along the way. An excellent place to start is the official Tax Reform Publication 5318, which you can download for free. It also has a lot of other helpful information, from what the IRS calls a "taxpayer ID" to the most efficient ways to file your taxes.

While it's not a comprehensive list, it provides a solid starting point to get your act together. If you're a small business owner, it's essential to get your arms around the TCJA so you can better manage your cash flow and tax situation. Fortunately, the IRS has several e-file options for small businesses. In particular, you'll want to download the free tax reform e-filing form. Using this form, you'll be able to claim your business's deductions and taxes most efficiently. You may have to do more than one e-filing if you're a large organization, but this e-filing form makes the process as painless as possible.

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