Virtually no one in Wisconsin particularly enjoys tax season, but these feelings may be especially pronounced among small business owners. Filing taxes can be a time-consuming and confusing task for entrepreneurs and those who run their own businesses. The whole process might seem even more confusing since the implementation of the Tax Cuts and Jobs Act of 2017, so here are a few ways in which those changes affect small business law.
Owners running partnerships, sole proprietorships and LLCs treated as either partnerships or sole proprietorships are called pass-through business entities. In the past, any net taxable income generated by these types of business entities was passed on to its individual owner, who had to pay taxes at personal rates. Now, these owners can file a deduction on their share of the QBI -- qualified business income. In some cases, the deduction could amount to as much as 20 percent of the QBI.
While this is a new deduction, business owners should also be aware that some deductions are nearly disappearing. Prior to the new rules, it was generally possible to deduct as much as 50 percent of a business' entertainment expenses. Now, deducting entertainment expenses will be largely impossible. Some exceptions apply, such as meals purchased during business entertainment or when entertaining customers or clients.
The changes to the tax laws can potentially cause some serious headaches for Wisconsin business owners. Some may even worry that they will miss the filing deadline as they try to sort out which deductions they qualify for or whether some deductions even exist anymore. Although understandably distressing, consulting with an experienced small business law attorney can help put some of these concerns at ease.