WASHINGTON — The Internal Revenue Service today reminded small businesses that recent tax reform legislation lowered the backup withholding tax rate to 24 percent and the withholding rate that usually applies to bonuses and other supplemental wages to 22 percent. The agency also urged employers to encourage their employees to check their withholding using the IRS Withholding Calculator. [Read more…]
New IRS resources on IRS.gov help businesses understand tax reform
New IRS resources on IRS.gov help businesses understand tax reform
Last year’s Tax Cuts and Jobs Act made significant changes to the tax law that affect small businesses. The IRS posted two new resources on IRS.gov to help taxpayers understand how these changes affect their bottom line.
Here are some details about these resources:
New publication: Tax reform: What’s new for your business
This electronic publication covers many of the TCJA provisions that are important for small and medium-sized businesses, their owners, and tax professionals to understand. This concise publication includes sections about:
- Corporate tax provisions
- Qualified business income deduction
- Depreciation: Section 168 and 179 modifications
- Business-related losses, exclusions and deductions
- Business credits
- S corporations
- Farm provisions
New webpage: Tax Reform for Small Business
This one-stop shop highlights important tax reform topics for small businesses. Users can link to several resources, which are grouped by topic:
- New deduction for qualified businesses
- Withholding
- Deductions, depreciation and expensing
- Employer deduction for certain fringe benefits
- Like-kind exchanges
- Real estate rehabilitation tax credit
- Changes in accounting periods and methods of accounting
- Corporate methods of accounting
- Blended federal income tax
- Employer credit for paid family and medical leave
- Farmers and ranchers
IRS urges ‘Paycheck Checkup’ for key groups; tax withholding may need adjustment
How the Employer Credit for Family and Medical Leave Benefits Employers
During National Small Business Week, the IRS focuses on educating employers about the employer credit for paid family and medical leave created by the Tax Cuts and Jobs Act passed last year. Employers may claim the credit based on wages paid to qualifying employees while they are on family and medical leave.
Here are some facts about this credit and how it benefits employers:
- To claim the credit, employers must have a written policy that meets certain requirements:
- Employers must provide at least two weeks of paid family and medical leave annually to all qualifying employees who work full time. This can be prorated for employees who work part time.
- The paid leave must be not less than 50 percent of the wages normally paid to the employee.
- A qualifying employee is any employee who:
- Has been employed for one year or more.
- For the preceding year, had compensation that did not exceed a certain amount. For 2018, the employee must not have earned more than $72,000 in 2017.
- For purposes of this credit, “family and medical leave” is leave for one or more of the following reasons:
- Birth of an employee’s child and to care for the newborn.
- Placement of a child with the employee for adoption or foster care.
- To care for the employee’s spouse, child, or parent who has a serious health condition.
- A serious health condition that makes the employee unable to perform the functions of his or her position.
- Any qualifying event due to an employee’s spouse, child, or parent being on covered active duty – or being called to duty – in the Armed Forces.
- To care for a service member who is the employee’s spouse, child, parent, or next of kin.
- The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year.
- An employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Any wages taken into account in determining any other general business credit may not be used toward this credit.
- The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017. It is not available for wages paid in taxable years beginning after December 31, 2019.