This year brings sweeping changes to our tax laws and small business owners should be aware of how they will affect them. While many people only think about taxes for a few days a year, small businesses need to be vigilant with accounting and tracking at all times and keep up with the latest changes.

First, some quick notes on this year’s due dates:

• For sole proprietors and single-member LLC's preparing their business taxes on Schedule C: April 17, 2018
• For partnerships and S corporations: March 15, 2018
• For corporations; April 17, 2018

Notable Changes:

• The new tax law now provides for a flat 21% tax rate for corporations. - Forbes

• 5 cents per mile for business miles – The Balance

• Owners of pass-through entities—sole proprietorships, partnerships, limited liability companies, and S corporations—will be able to claim a 20% deduction of their pass-through business income, but various limitations apply. Some service businesses may not be able to enjoy this deduction once income exceeds a threshold amount. The change only lasts until after 2025. - Experian

Tax Implications of Cash Advances

Although cash advances are not loans, they are advance payments on future sales, which make them exempt from taxes at the time of the advance. Business owners will pay taxes on their income, even the income that goes to back to the cash advance company to repay the advance. You do not pay on the lump sum when it is advanced.

Furthermore, you can deduct the fees paid to the cash advance company as a business expense, just as you would deduct any other fees paid by the business. In effect, merchant cash advances have a neutral effect on the taxation of the business. They don't shelter any of the business's income from taxes, but neither do they subject it to any more taxation than it otherwise would be.

When it comes to taxes, cash advances are treated much the same way as loans even though they are not loans. The advantage for your business is that the money is available when it is most needed or when it provides the greatest advantage. Without financing, it would be next to impossible for many small businesses to expand, open a second location, or hire employees that will allow their businesses to grow.

How to Treat a Cash Advance for Tax Purposes

When depositing money from a cash advance into your business account, it can be treated as a pass through or in the same way that loan proceeds are treated, even though it is not classified as a loan. The correct designation would be an advance payment to which liability is attached. Do not report any cash advance money received as income.

As money is deducted from daily credit card receipts, you can deduct the portion that represents the fee paid. Your cash advance provider or your accountant may be able to give you information about how to calculate this amount, or if the advance is repaid all in the same calendar year, the entire fee can be deducted at that time.

It is always best to consult with your accountant or tax adviser to discuss your individual situation.

With over 12 years in the business, Quikstone Capital Solutions has proven to be a trustworthy and knowledgeable lender specializing in small business funding. Over 60% of our clients are renewals looking to continuously grow their business. Whether you need cash for emergencies, cash to cover unexpected costs, or if you’re looking to make long overdue improvements, Quikstone Capital can help.