Tax Change…3 Things I Now Know

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:: If you were at all like me…you ignored all the tax legislation discussion in December hoping somehow it would all go away or get sorted out without rocking your own personal boat too much.   If you didn’t put your head in the sand then I openly congratulate you for being proactive and informed.

Luckily for the rest of us, WIC member Rebecca Cafiero organized a free conference call earlier this month for WIC members with her tax and legal expert, Scott Burnett. It was painless, informative and will be available to stream from a WIC web page. (I’ll post the link in the comments when it goes live.)

Since that call I have pulled my head out of the sand and now know 2017 is the year to prepare if you want to take the most advantage of this business-friendly legislation (not my characterization of the law, that comes straight from the expert).

While the discussion was detailed and thorough, here are the three actionable items I am addressing:

  1. As of 2018, standard personal deductions and exemptions are combined into one number. While that seems kind of wonky, it really affects your personal income as itemized exemptions like charity, medical, etc. now need to be GREATER than $12,000 for individuals, $18,000 for the head of household and $24,000 for married filing jointly. So what am I going to do? I’ve been looking back to see if I have ever crossed that threshold in my taxes for the last 5 years. If I’m close, I’ll watch it very carefully in 2017. If I am nowhere near, then I’ll put the energy someplace else.
  2. For business, the biggest change is meals and entertainment are no longer deductible. Yes, that tried and true method of networking is no longer going to help on your taxes. There were several creative restatements of the question with caveats and exceptions but the expert held the line – NO DEDUCTIONS FOR MEALS AND ENTERTAINMENT. Even if you travel overnight to an event, only your personal meals are deductible. I can only imagine the howls of sales managers when they try to expense client dinners at trade shows. For me, I’m going to keep things simple…more lunches; fewer dinners.
  3. This is the year to evaluate shifting your business income to a limited liability S corporation (LLC) that does not require you to pay self-employment taxes. Deadline is March 15th for any going concern, while a brand new business can file anytime. While this was true in other years as well, this year you are likely to take a hit in other areas of the tax code so be prepared with this one to offset the inevitable (my words not his). And while there was a lot of Q&A about S vs. C the expert held firm on consultants typically having the best tax outcome as an S Corp.

So to sum it all up in the speaker’s own words, “The more you know the less you owe.” I’m glad I called in, saved me a lot of extra procrastinating.

And if you are still stuck on this topic, here’s two more upcoming events to get you started.

  1. What the 2018 Tax Reform Means for Consultants? PATCA Evening Meeting Thursday, February 8, 2018, at 6-9pm in Sunnyvale, Register here.
  2. Tax Reform for Pass-Through Entities Webinar, Wednesday, February 7, 2018 at 12:00pm – 1:00pm PST, Register here.
amyjhuson@gmail.com' About Amy Huson

Amy Huson is a new member of WIC who is just starting her marketing consulting practice. She's focused on marketing strategy reviews and go-to-market planning for small to mid-size companies looking to re-align their digital and traditional marketing practices.

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