e-News for Small Business Issue 2018-35

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e-News for Small Business October 23, 2018

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Issue Number: 2018-35 

Inside This Issue

  1. Several tax law changes may affect bottom line of many small business owners
  2. New tax law changes the backup withholding rate
  3. Treasury, IRS issue proposed regulations on new Opportunity Zone tax incentive

1. Several tax law changes may affect bottom line of many small business owners

Tax reform legislation passed last December affects nearly every small business. With just a few months left in the year, small businesses and self-employed individuals have resources available to help them understand and meet their tax obligations.

Get more information about several changes that could affect the bottom line of many small businesses, including:

  • Qualified business income deduction
  • Temporary 100 percent expensing for certain business assets
  • Fringe benefits
    • Entertainment and meals
    • Qualified transportation
    • Bicycle commuting reimbursements
    • Qualified moving expenses reimbursements
    • Employee achievement award

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2.  New tax law changes the backup withholding rate

The Tax Cuts and Jobs Act reduced the backup withholding tax rate to 24 percent. When it applies, backup withholding requires a payer to withhold tax from payments not otherwise subject to withholding.

Payments subject to backup withholding include (but are not limited to):

  • Interest payments;
  • Dividends;
  • Rents, profits or other income;
  • Commissions, fees or other payments for work performed as an independent contractor;
  • Payments by brokers and barter exchange transactions;
  • Payment card and third-party network transactions and
  • Royalty payments.

See IRS Publication 1281 to learn about when backup withholding applies and other information.


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3.  Treasury, IRS issue proposed regulations on new Opportunity Zone tax incentive

The Treasury Department and the Internal Revenue Service issued proposed regulations for the new Opportunity Zone tax incentive to clarify that almost all of the associated capital gains qualify for deferral.

Opportunity Zones, created by the 2017 Tax Cuts and Jobs Act, are designed to spur investment in distressed communities through tax benefits. A nomination process completed in June resulted in the designation of qualified Opportunity Zones in 8,761 communities in all 50 states, the District of Columbia and five U.S. territories. Investors may defer tax on almost any capital gain up to Dec. 31, 2026 by making an appropriate investment in a zone, making an election after Dec. 21, 2017, and meeting other requirements.

More information on Opportunity Zones is available on IRS.gov/taxreform. This page will also feature updates on the implementation of this and other TCJA provisions.

Click here for a complete list of Opportunity Zones.

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