Roseville and Sacramento Accountant and CPA for Partnerships

Cook CPA Group

If you want to go into business with a friend or a business acquaintance, forming a partnership may be your best option. There are various factors to consider when operating a partnership. For example, you need to determine how the formation of the partnership affects how the business is taxed. If you and your business partner require accounting services for your partnership, you should consult with an experienced Roseville accountant for partnerships.

Cook CPA Group knows the tireless amount of work that is needed to keep a business successful and profitable, and we are here to help you continue to reach those goals. Our firm can help you manage the tax liabilities for your partnership and deal with any accounting issues that may arise. To schedule a free consultation, contact Cook CPA Group at (916) 259-8471, or contact us online.

New Tax Regulations for Partnerships

Every owner of a partnership should know that the filing date for income taxes is March 15. When March 15 ends being on the weekend or during a holiday, a partnership is responsible for filing their taxes on the next business day. Failure to make a timely filing could result in a number of tax penalties.

The Tax Cuts and Jobs Act of 2017 (TCJA) changed many tax regulations that pertain to U.S. partnerships. One major change to the tax laws that partnerships must follow is the ability to use the cash accounting method instead of the accrual accounting method — the primary difference between cash accounting and accrual accounting is when income is documented.

The cash accounting method allows a partnership to record income when a client pays their bill for goods or services. For example, if you contracted to provide services to a client in March and the client paid you for your services in April, the cash accounting method would allow you to document that income in April. Cash accounting also permits a partnership to document expenses when money is paid to an employee or a supplier.

Alternatively, under the accrual accounting method, the partnership must record income when it is earned. This means that if you contract to perform a service for a client in March, you must document the income from this service in March whether the client paid promptly or not. Similar to cash accounting, accrual accounting also applies to the recording of business expenses.

Before this new tax regulation, many small businesses were forced to use the more tedious accrual accounting method that is popular among large businesses that earn millions in profits every year. Other substantial tax law changes initiated by the TCJA include:

  • A 20 percent deduction on partnership net income on top of normal business deductions, however, several requirements must be met
  • An increase in write-offs for depreciating partnership assets (machinery, vehicles, real estate, etc.,)
  • Entertainment expense deductions were completely eliminated while the availability of some meal expense deductions was decreased
  • No more deductions for commuter benefits for employees
  • The elimination of the Work Opportunity Tax Credit and other business tax credits

To learn more about partnership tax regulations and filing income taxes for your business, you should continue reading and speak with an experienced Roseville CPA for partnerships.

Filing Partnership Income Taxes

The formation of a partnership plays a role in determining how the business is taxed. This means that a general partnership could be taxed differently than a limited partnership. The partnership agreement may also affect how the owners of the partnership are taxed. Cook CPA Group can help you ensure that you do not miss a detail that affects your income tax return.

Partnerships are required to file their federal income tax return using IRS Form 1065. Form 1065 is known as an information return. This means that the information provided using this form is not directly used to address the tax liability of the partnership.

The partnership must also prepare a Schedule K-1 and distribute it to each partner. This form will address a partner’s shares of the taxable income and losses of the partnership for the particular tax year. It is important to note that a Schedule K-1 must be filed with a partner’s personal income tax return.

Partners should also remember to file self-employment taxes. Failure to file these taxes could result in a large tax bill for a partner.

Our firm can further walk you through what you need to file income taxes for your partnership and other tax-related issues that may arise.

Work with Our Trusted Sacramento CPA for Partnerships

If your business needs accounting assistance, you should contact an experienced Sacramento CPA for partnerships. The accounting team at Cook CPA Group possess decades of combined accounting experience, and we would be proud to use that experience to represent your partnership. Our firm has served businesses located in Roseville, Sacramento, and across California and we are prepared to represent you. To schedule a free consultation, contact Cook CPA Group at (916) 259-8471, or contact us online.

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