[Video] Tax Reform and Your Business
How does the tax reform bill and its many provisions impact businesses? Mike Trabold, director of compliance at Paychex, identifies some of the top issues that businesses should be aware of this year.
More tax reform videos: Tax tables and Form W-4 changes | Employer tax credit for paid family and medical leave | Pass-through entities and accelerated depreciation | Affordable Care Act changes | States' response
Hi, I'm Mike Trabold, the compliance director here of Paychex. And as everybody probably knows by now, the tax reform legislation has been passed. So as you can imagine, we're getting plenty of questions from clients and other small businesses around what it might mean for them.
Probably the most significant aspect of tax reform is just lower business tax rates across the board, both a significant decrease in the corporate tax rate to 21 percent, as well as new deductions for businesses and even individuals that might want to organize as a pass-through, like an S-corp, or an LLC, or a partnership. Lots of conditions and lots of rules around those, so you'll definitely want to check in with your tax advisor and your attorney around those. But certainly, some significant benefits to be had.
Another really significant aspect with tax reform is, obviously, changes to individual tax rates, both the rates themselves, and brackets, and deductions. We're waiting from the IRS to get the actual withholding tables showing the revised rates. We expect those in the next couple of weeks, and we'll be ready to implement those very rapidly when they come in.
What the states do will really be a significant thing that businesses will have to watch as well. Many states have their tax structures in some way tied to the federal picture, so when the federal picture will change you'll to be ready for some changes at the state level as well.
Another kind of very well-publicized aspect, especially with higher tax states, is the reality that, given the loss of some of the deductibility of state and local taxes as part of federal tax reform, some of the higher tax states are looking at some changes to their tax structure and tax rates to kind of compensate for that. Some of those changes are pretty edgy. It remains to be seen how viable those will be. But it's something that businesses will absolutely want to keep an eye on, especially if they're in one of those states.
Another thing that many businesses are obviously well-acquainted with is the Affordable Care Act. Really, no changes through tax reform to the employer mandate, so any responsibilities you have there are going to have to continue. But a lot of dilution to the individual mandate, mostly starting in 2019. And as that situation evolves, businesses will have to keep an eye on that to determine if there's any potential impacts to them.
We here at Paychex are watching the changes that we talked about and many more to make sure that our businesses and our clients are really up-to-date on what those changes are, and that we can make the updates to our systems and our processes in a timely basis to really ensure that our clients will be able to get the full benefit of tax reform, and also address any new obligations they might have.
We're talking on a very regular basis with our contacts at the IRS and the state tax authorities to make sure we're abreast of the newest developments and are making all the updates on a timely basis that we need to.
Two other things that we're really excited about for businesses are the ability to take advantage of some enhanced depreciation and expensing rules that will allow businesses to more quickly deduct from their taxes, investments that they make in their business.
Another thing that's really interesting is if you're a business that provides pay leave to your employees, you'll be able to deduct a portion of the wages that you pay to your employees while they're on leave. Again, more rules to come on that, but, potentially, a really significant benefit.
We're also going to be providing some additional videos that will be going into some more detail on some of the more key aspects of tax reform, and very regularly updating paychex.com and our Paychex WORX site so that our clients are aware of the newest developments.