Tax Reform And Payroll

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Tax Reform And Payroll
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• Back at the beginning of November - as youll
  doubtless already know - the bill language was
  unveiled for the much discussed and long awaited,
  federal tax reform. One important provision
  highlighted in the bill, would lower the
  pass-through rate for business income to 25,
  leaving the top individual tax rate at 39.6,
• What is 'pass-through' business income?
• Pass-through business income is basically any
  income coming from a business, that gets passed
  through to business owners and is taxed at their
  individual rates. A significant amount of
  business owners incomes, are then taxed at a
  lower rate than what would be the standard
  maximum individual tax rate.

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• The growth of pass-through businesses has
  gradually begun to erode corporate and payroll
  revenues.
• S corporations and payroll
• For tax purposes within the U.S. an S corporation
  is a closely held one that makes a valid election
  to be taxed under subchapter S of chapter 1 of
  the Internal Revenue Code. They do not generally
  pay income taxes, rather the corporations income
  or its losses, are split and divided among its
  shareholders. The shareholders must then go on to
  report the income or the loss, on their own
  personal income tax returns.

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• The way the law stands currently, shareholders of
  an S corporation are permitted to receive both
  regular wages, and a share of the companys
  profits. The relevant payroll taxes are then
  subtracted from their wages, just as they would
  be for any regular employee. Their profit sharing
  goes on to be taxed as income, and at a different
  rate.
• How tax reform might encourage underreporting of
  wages
• Reform, as it currently stands, may provide
  shareholders of S corporations with an incentive
  to inaccurately report their wages and go on to
  claim more as pass-through business income. In
  doing so, they would not be legally required to
  pay Medicare payroll taxes.

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• As a form of payroll tax avoidance, this occurs
  frequently, but it may occur even more often if a
  larger differential is put into place as part of
  the tax reform, between payroll and pass-through
  tax rates.
• Other effects of tax reform which may have an
  impact upon payroll
• Some examples of other aspects of the new tax
  bill that may go on to affect U.S. business
  owners are listed below
• WOTC or work opportunity tax credit, which
  allows some employers to request a tax deduction
  for qualified military veterans working for them,
  would begin to be phased out

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• Adoption assistance, education assistance, work
  related entertainment or employer provided
  childcare, to name but a few tax-free benefits
  offered to many employees by their employers,
  would either be eliminated completely or
  significantly reduced.
• Estate tax would be eliminated, possibly
  affecting a great number of smaller businesses.
  This tax applies to estates that are worth at
  least 5.6 million in assets, and the threshold
  would begin by increasing to 10 million, and go
  on to be phased out entirely after a period of
  six years.

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• As the tax reform bill is in its early stages,
  its vital that if youre a business owner, you
  try to keep as up to date as you can on all
  issues surrounding tax reform and payroll, and to
  ensure that you have the correct information at
  any given time, you can always seek professional
  help in the form of a company offering a range of
  payroll services, of which there are many
  reputable ones throughout the country.
• The tax reform package still must be approved in
  committee, and then it will need to pass both the
  House and Senate. In other words, theres a long
  way to go before anything like whats being
  proposed might be put into place.

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• Its important for business owners to stay up to
  date on all thats happening at the federal
  level, including how it could affect their
  payroll taxes and other obligations.
• Apollo Payroll is one of the premier small
  business payroll services companies in Miami and
  Coral Gables. Apollo Payroll is dedicated to
  delivering expert advice, responsive service, and
  highly accurate payroll processing and reporting
  to ensure the success and growth of the business
  that we serve. Our services include comprehensive
  payroll services in Homestead and other cities in
  Miami-Dade County, employee background check and
  group health insurance in Miami Coral Gables.