The tax laws are constantly evolving. It’s critical for business owners to stay informed about any shifts in order to remain compliant and ensure profitability. From the reporting requirements, the structure you choose, and your cash flow, every change can have an impact on various aspects of your business operations. While tax reforms can create challenges, they can also provide opportunities for growth.

Here are several ways changes to the tax laws — including those included in the One Big Beautiful Bill Act — can affect your business:

Cash Flow

Changes to the tax laws can have a ripple effect on your company’s cash flow by either increasing or decreasing the amount of capital you have to operate your business. For instance, while higher tax rates mean more money going to the government, lower rates can make more funds available to expand your operations. Accelerated depreciation methods can also free up cash flow for long term capital assets.

Business Structure Advantages

Business entity types are all taxed differently, and a structure that was once optimal may need to be reevaluated in light of tax law changes. Any tax reforms can alter the advantages and disadvantages of structures such as sole proprietorships, LLCs, corporations, and S-corps. Importantly, changes to the tax rates may result in some structures receiving more favorable tax treatment than others.

Deductions and Expensing

New tax laws can also mean changes to the business deduction and expensing rules. This can affect how much of your business income is subject to taxation, influence purchasing decisions, and impact the timing of investments. Ultimately, revisions to these rules can require an adjustment to your overall tax strategy.

Here are some ways the recently passed One Big Beautiful Bill Act impacts business deductions and expensing:

• Permanently extends the Section 199A pass-through deduction.
• Reinstates 100% immediate expensing for qualified business investments.
• Allows businesses to take advantage of immediate expensing for research and development.
• Restores the EBITDA-based calculation for limiting business interest deductions under Section 163(j).
• Increases the maximum amount that can be expensed under Section 179 to $2.5 million.

It’s essential to work with a knowledgeable tax advisor who can discuss the impact the new deduction and expensing rules will have on your business.

Reporting Requirements

Tax law changes can result in new or modified reporting obligations. For example, under the American Rescue Plan Act of 2021, the reporting threshold for Form 1099-K had been lowered to $600 for goods and services in one calendar year. The One Big Beautiful Bill Act has reinstated the prior threshold, requiring a 1099-K only in cases where the payee receives over $20,000 for goods and services and has more than 200 transactions.

Additionally, the new tax reforms have increased the threshold for reporting payments to non-employees for services rendered from $600 to $2,000, adjusted for inflation annually. This can significantly reduce the number of 1099-NEC forms a business must issue and ease the administrative burden.

It’s vital to be aware of any changes to the tax reporting requirements to ensure your business remains compliant.

Plans for Growth and Expansion

Updated tax laws can mean new incentives for investments — or if such incentives are removed by any shifts in the tax laws, growth projects may be delayed. In addition, changes to the bonus and depreciation rules can significantly impact the timing of purchasing new equipment by influencing the tax benefits available. Notably, since the One Big Beautiful Bill Act avoids tax hikes for many businesses, it allows them to dedicate more capital to growing and expanding operations.

Contact an Experienced Tax Professional

A skillful tax professional can help you stay up to date with the tax law reforms and ensure you remain compliant with the latest regulations. Based in Fairfield, Connecticut, Rolleri & Sheppard CPAs, LLP provides strategic guidance to business owners and individuals for tax planning matters. Contact us online or call (203) 259-CPAS to schedule a consultation.