What Should Tax Professionals Know About the Tax Cuts and Jobs Act?

What Should Tax Professionals Know About the Tax Cuts and Jobs Act?

The 2017 Tax Cuts and Jobs Act (TCJA) made the most sweeping changes to tax laws in over three decades. But because of the intense Congressional negotiations leading up to the TCJA's passage, many taxpayers—and even tax professionals—have been left unsure as to exactly how these new rules will impact their clients. 

If you're struggling to wade through the myriad changes the TCJA has generated, you're not alone. Read on for several key takeaways for tax professionals during the 2018 tax season and beyond.

Check the New Withholding Tables for Your Clients  

Many individual taxpayers were pleasantly surprised to see paycheck increases in January, February, or March 2018 as a result of the new withholding tables. Unfortunately, these increases may not be warranted for all taxpayers, some of whom may be in for an unpleasant surprise when filing their 2018 taxes. To help your clients avoid a large, unexpected bill next April 15, ensure that they're claiming the proper number of exemptions under the new tables. 

Pay Attention to Reverting Provisions

Not all the TCJA's changes are permanent. For example, the lifetime gift exemption is doubling to $11.2 million per person, limiting the reach of the estate tax—but only until 2026, when this exemption reverts to its lower amount. This means that many high-net-worth clients may want to fully maximize the new limit over the next eight years by front-loading gifts to family members and friends. 

Taking note of each of the TCJA's reverting provision can ensure the advice you're giving your clients is tailored to their needs while taking full advantage of temporarily lifted caps and exemptions.

Pass-Through Businesses Make Financial Sense for Many Clients

One of the biggest changes the TCJA made to the business landscape was the new 20 percent income deduction for S corps, LLCs, partnerships, and sole proprietorships. If you have a client who has been on the fence about incorporating their business, this added benefit may be enough to tip the equation toward incorporation. 

Tax professionals have been inundated with questions since the TCJA took effect. While the answers to some of these questions have yet to be revealed, even by the brightest minds in the business, staying abreast of the broad structural changes conferred by the TCJA can ensure your clients are always getting up-to-date advice. 

Want more help? Try our new continuing education courses featuring the Tax Cuts and Jobs Act.