Federal officials are now ironing out the Tax Cuts and Job Act of 2017 legislation, and accountants say certain sections will impact small business owners this tax filing season.
The Internal Revenue Service spent much of 2018 coming out with further guidance on the Tax Cuts and Job Act passed by Congress. Meredith Tucker, Kaufman Rossin principal for the entrepreneurial services division, said she still expects more developments as her clients file early in the spring.
She said “CPA’s (Certified Public Accountants) are eager to see what develops, and then we are going to guide our clients accordingly.”
The section 199A, as part of the Qualified Business Income, presents a new 20% deduction for small business owners that are pass-through entities and that hire employees. The qualified business deduction presents a potential win for the likes of LLC’s and S-Corporations. The change forces many in South Florida to reassess what boxes they check off as an entity.
And the challenges do not stop there, Ms. Tucker said “Then, on top of that, are the things that we may want to do such as paying out bonuses or looking at opening up a separate company for separate type of operations. It has caused a lot of our clients to take a deep breath and to look at their business in a more holistic way, which is great, not because of the law but because it can bring other planning opportunities to light.”
The legislation also forces the Internal Revenue Service to redefine what specified service businesses look like and what benefits they receive. Specified service businesses perform a particular activity within certain key fields – think accounting, health, law, or performing arts.
Ms. Tucker finds that many of her clients are seeking advice on whether their service fits the bill. She finds that married couples filing together and make over $417,000 will lose out on these deductions for specific service business.
This new law is increasingly complex to the point where I don’t know how a small business owner would be able to map this out if they weren’t sitting down with a professional to look at the big picture because it is not enough to consider your business,” Ms. Tucker said “You have to think what is going to pass through to your personal return, to your other items of income, losses and deductions. Tweaking one number in this holistic view may have unintended consequences.”
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