Heads up. Changes are coming.
We know—old news. But as rapidly as tax laws have been changing, be sure to keep this top of mind. Already in place are the new Tax Cuts and Jobs Act. The 100% bonus depreciation started for purchases from 9/27/17.
More changes are on their way.
Which ones, you ask?
Here’s a hint: your divorced clients aren’t going to be happy. Alimony beginning after 1/1/19 will no longer be deductible.
With these changes and others, will you be prepared to handle mass confusion and answer your client’s questions?
It will be easier if your client’s email their questions. That buys you a little time. But what about face-to-face meetings? In these cases fumbling around for answers won’t cut it.
The best way to handle your clients’ questions is not to wait until the questions get asked. Be prepared. Put ongoing training in place and arrange for support ahead of time.
This year, with all the changes, plan on getting all kinds of questions.
How about an example?
Let’s say a client comes to you asking about the new law for 2018 for pass-through threshold income deductions. They want to know whether they can set up a C-Corp or S Corp as an independent contractor before April 15th and apply it to their 2017 income tax.
Now, their activity isn’t just a hobby. They qualify as a business in terms of hours spent. But they really need the deduction to be applied to their taxes even though they earned less than $50,000 in 2017.
What are their options?
That’s a loaded question. The new tax law, including the pass through income reduction is effective for their 2018 tax return. It is not applicable for their 2017 return.
Why? Because they can’t take a pass-through income reduction in 2017.
How about this next dilemma?
Can you help your client set up a C Corp and S Corp in 2018 and make it retroactive to 2017? No.
They need to be set up and ready to go the year in which they want it to be effective. Until this happens, they can’ t use it.
Brace yourself. You’ll be fielding questions like this all year. Some will be easily answered. But be prepared for the ones that aren’t. Your clients will also come to you looking for resolution for some fairly complicated issues.
Preparation comes with education. Follow our blog to learn more about existing and future changes in the law. Understand the difference between a C Corp and an S Corp and how to advise your clients of the best options.