Tinley Park tax law seminar provides insights to businesses
The Village of Tinley Park and the Women’s Business Development Center hosted a tax law seminar called, “Good for My Small Business?” Feb. 15 at Village Hall—Kallsen Center.
By design, the program aimed to inform residents about how federal changes to the tax law will impact their personal tax return filings, as well as engage with established and prospective business owners to give them insight on what to expect when they file taxes.
Last year, President Donald Trump enacted reform to federal tax codes, which are to impact 2018 taxes.
“There’s a lot of different ways that we can do economic development,” Economic Development Manager Patrick Hoban said. “Everybody loves the shiny, new restaurant or the big building, but I firmly believe that 80 percent of our growth is going to come from our local businesses.”
Hoban said he thinks that disseminating information about the tax law change is important.
To equip established and prospective business owners with the information and technology necessary for success, the Village of Tinley Park partnered with the Tinley Park Chamber of Commerce and the Women’s Business Development Center to satisfy this aim.
Kathryn Humecki and Associates certified public accountant Kathryn Humecki spoke to those on hand for the program and said the taw law impacts almost all businesses, including C-Corporations, S-Corporations, and partnerships and sole proprietorships.
A change of note to the law includes a flat tax of 21 percent for C-Corporations. Previously, the rate ranged anywhere from 15 and 35 percent.
“It’s a major impact on the entire economy,” Humecki said. “I think you’ve kind of seen that a little bit. You see a little bit stock market stuff going a little crazy because people [are] concerned for inflation, but it seems like things are leveling out.”
There is no longer an alternative minimum tax on corporations. A protection used to be in place if a business had many deductions, enabling an owner to pay $0 in taxes. Under the new law, there is no measure in place making an owner pay more in taxes, as there is a 21 rate assessed to C-Corporations.
Humecki said with corporate taxes, the Illinois state tax is higher at 7 percent and stressed that it’s important to note that you would have double taxation, which means that if you take money out, it’s taxed as a dividend.
Humecki wanted people to know that as a small company, an owner may want to look into converting from an S-Corporation to C-Corporation.
“You do the math on certain things, it might work out for you depending on how much income you have in your account,” Humecki said.
A pass-through deduction of 20 percent was instituted for all other businesses.
“It’s not a business deduction,” Humecki said. “It’s taken on your [IRS Form] 1040.”
This credit does not apply to investment income, the owner’s wages and other forms of revenue.
The pass-through deduction is not available to certain businesses in various industries.
After the law was passed last year, the IRS still is required to create a technical corrections bill with corresponding regulations.
“I don’t think they’ve created any—or maybe, very few—regulations on this tax law so far,” Humecki said. “We’re not quite sure how all of it will work.”
What’s more is the technical corrections bill will need 60 votes to pass. The tax code was approved with a simple majority.
To apply for the 20 percent pass-through deduction, however, anyone who has a specified business that makes less than $157,500 for a single person and less than $315,000 for filing jointly, qualifies. To apply for a portion of that same deduction, anyone who makes more than $157,000 for a single person or between $315,000 and $450,000 for filing jointly, qualifies.
If one’s business is not one of the specified businesses, there is a chance for one to get either the lesser of 20 percent of your qualified business income or the greater of 50 percent of the W-2s that you paid out in wages for 25 percent of W-2s, plus qualified assets.
Humecki said the code is merely trying to make sure that businesses with big profits are paying their employees.
“This, here, is really related to businesses that have large assets, like a large real estate assets that are not necessarily rental,” Humecki said. “That would be your hotels and things like that.”
As for sole proprietorships, 20 percent can be deducted from one’s IRS Form 1040.
Humecki said if you’re currently taxed as a S-Corporation, you might want to consider converting to a sole proprietorship, but it depends on your income level and what your personal tax rate is.
Humecki wanted it to be clear, however, that you would lose your corporate legal status and said make sure that you’re well insured.
Other tax law changes impact the way that depreciation, interest deductions, child tax credits and net operating losses are taken into account.
Things in talks to change under the tax code that still stand are the Affordable Care Act tax, student loan interest deductibility and tuition waiver exclusion.
Humecki wanted it to be clear that the 20 percent pass-through deduction will sunset at the end of 2025.
“This is a bit of a break we’re getting for a short period of time,” she said.
Humecki encouraged anyone in need of help filing their taxes to work with a certified public accountant.
For more information about the Women’s Business Development Center, visit www.wbdc.org or call 312-853-3477.