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Tax Reform Deduction Explained

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IRS issues guidance on tax deduction for businesses

The IRS has clarified a tax break that will directly benefit you.

The tax reform bill that President Trump signed into law this year allowed certain types of businesses to take a 20 percent tax deduction. Some PEO clients expressed concern over their eligibility to claim the deduction since the tax reform did not address businesses in a PEO relationship.

While it was previously unclear new proposed rules address the uncertainty around the tax break.

The U.S. Department of Treasury and the IRS recently released guidance that states clients of a PEO can take the income tax deduction. Wages paid by a PEO on behalf of a client will count toward the sponsoring company, allowing the client to get the fullest extent of the tax deduction.

Put simply, your company’s tax deduction remains yours, regardless of your partnership with a PEO.

There are other factors to qualify small business owners for the tax deduction. To be sure you are in full compliance with IRS regulations when claiming your tax deductions, you should consult your financial advisor and/or legal counsel for additional advice or guidance on tax reform laws.

Nextep will continue to monitor any updates to the tax reform laws that may affect small businesses.

Have payroll questions? We’re here to help! Contact us online, by email, or at 888-811-5150.

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