While many business owners know they'll owe the government less money or perhaps get refunds under the new tax law, others are still unsure about what they might have to pay while they file their returns. They need to be sure they have some extra cash, or access to financing, in case they're facing sizeable tax bills.
The owners with some of the greatest uncertainty are those who are sole proprietors, partners and shareholders in S corporations; they are the ones hoping to claim a 20 percent deduction for their qualified business income. Their returns and tax payments are due April 15.
The problem for these owners is that the deduction is based on their taxable income and therefore includes other income that they have, even if it's not from the business. And if they're married, their spouses' income is included in the calculations. Another factor is whether they have employees.
But owners have time to accumulate cash, and they may discover that it's easy to find ways to free up money in their companies.
Small business advisers suggest first that owners stay on top of invoicing and payments. Getting invoices out promptly is a start. And if some customers are slow payers, it may be necessary to negotiate different terms or give them incentives to pay faster.
Another way to bring in more money is to raise prices where possible. That may be easier in the first couple of months of the year.
Lowering expenses also helps. Owners should take a hard look at everything they spend, and see if they can order fewer goods and supplies and/or negotiate discounts with vendors. They should encourage employees to save energy by turning off lights and putting electronic devices into sleep mode.
Owners might consider crowdfunding, giving people who donate money merchandise or other rewards in return.
Some owners who get an unpleasant surprise at filing time might consider not filing their returns, something they should just not do -- they'll end up paying hefty late filing penalties as well as late payment penalties and interest. The advice from the IRS is, file and pay what you can. Owners must do this whether they file their returns or get an automatic extension of the filing deadline. They can seek an installment payment agreement with the IRS. The agency's Publication 4849, Can't Pay the Tax You Owe has information. It can be accessed on the IRS website, www.irs.gov.
--The Associated Press