With 2018 in full swing, the business community is waiting to see what sort of fallout comes from the new tax reform bill.

President Donald Trump ended 2017 by signing the Republican tax bill into law, potentially delivering huge wins for businesses big and small. The tax bill slashes the corporate tax rate from 35 percent to 21 percent. The bill also introduces a 20 percent deduction on qualified business income for pass-through businesses, subject to limitations and exclusions.

Larger companies that might be holding cash overseas can soon bring it back home to the U.S. at a tax rate of 15.5 percent. Income invested in physical assets, such as plants and equipment, will be taxed at 8 percent.

While the benefits of the tax bill have been signed and presidentially sealed, the political world’s influence on the business realm never ends. Business owners are often too busy running their companies to keep up with shifting political debate.This uncertainty ends up being more of a distraction than anything else, complicating the already delicate task of long-term financial planning.

Many business owners have a set routine when it comes to tax planning. Most entrepreneurs rely on their income to pay the bills, but unexpected consequences of the tax reform bill could throw them for a loop. A little bit of preparation could make a world of difference, though.

Focusing on the Fundamentals

At this point, most business owners still might be confused about whether they’re going to end up paying more or less in taxes under the new law. The answer to that question is different depending on entity classification and personal circumstances.

Beyond more tailored financial moves, there are some sure-fire tax guidelines that business leaders can perfect to protect themselves (and their companies). To reduce their tax liability, business owners should focus on the fundamentals:

  1. Pay bonuses and maximize retirement plan contributions.
    When a company has a net operating profit at the end of the year, it delivers a welcome word to the ears of employees: bonuses. Aside from pleasing your team members, paying out bonuses can reduce your tax liability.As long as you’ve accrued for them in 2017, you can pay out employee bonuses for the first 2 1/2 months of 2018. Tread lightly, though, as individual payroll taxes will increase in relation to an employee’s bonus — potentially undercutting any real benefit. For public companies, a bonus to shareholders (aka a dividend) is another possible way to lighten your corporate tax liabilities.
  2. Make the most of net operating loss.
    It’s never pleasant when your business operates in the red, but it isn’t all bad news. When your company has a net operating loss, you can mitigate that financial hit with some potential tax savings by carrying that loss forward in subsequent years.Let’s say 2018 ends up being a so-so year for your business. The net operating loss rules allow you to apply some of that loss to offset your tax burden during future profitable years. This is a bit of a shift from past tax regulations — businesses could previously use operating losses to get a rebate on taxes paid the two years prior. While farmers can still seek rebates moving forward, businesses cannot carry back any losses that arise in a taxable year after Dec. 31, 2017.
  3. Take care of your personal taxes.
    For most small business owners, business income often passes through to a personal tax return. Keeping a watchful eye on those personal returns is always a good idea, but it’s even more important when a new tax reality is on the horizon.Business leaders should partner with their accounting or legal consultants to evaluate how their business is set up and whether they have the most beneficial entity type given the changes in the law.
  4. Consider converting to a C corporation.
    With the reduction in the corporate tax rate to 21 percent, many businesses are curious about switching their entity type to a C corporation. While that 21 percent rate is appealing, there are a lot of moving parts to consider when making this decision.The conversion process can be relatively quick — taking less than a week if your company is based in a state that permits statutory conversions. That said, I highly recommend business owners consult with a tax professional who can help them understand the full tax consequences of changing entities.
  5. Be mindful of new deduction rules.
    While the dust has not yet settled on the new tax law, savvy business owners will want to pay attention to new deduction rules. Entertainment expenses, for example, are no longer deductible as of Jan. 1, 2018. Meanwhile, business meals are still 50 percent deductible.The new tax law eliminates miscellaneous deductions for individuals, which is an important change in some ways. Employees who use their personal vehicles for work purposes will no longer get a deduction for unreimbursed business miles, for example. As a result, business leaders might notice employees requesting cash reimbursement for more mileage going forward.

The business world is essentially at the starting line for the tax season sprint, waiting to see how the new tax regulations will affect the financial realm. While this sort of uncertainty creates some natural apprehension among business owners and entrepreneurs, there’s no reason to worry as long as you adopt a shrewd approach to your finances.

Eager to get a leg up on your company’s taxes? Download the Survival Kit for Corporate Tax Time whitepaper to ensure you’re ready before tax season hits.

Tammy Wendland also contributed to this post.