Why Tax Season is Never Really Over
It’s May, which means it is summer blockbuster season, people are getting ready for summer vacations, and many CPAs are wrapping up their tax files as another filing season goes in the books.
But like zombies in a horror movie, this one may be down but there is another one rising soon. Now is the time to identify what is coming next and how you can prepare to protect your clients.
There is one specific item that jumps out at me as I look forward: President Donald Trump’s potential tax reform. This is going to be at the front of our clients’ minds!
I know many CPAs who feel they are doing their clients a favor by not wasting their time discussing potential law changes. But it is important to remember that we are here for our clients, and we need to bring the possibilities to the table and let them make an informed decision on what is and is not important to them. When we assume what our client’s want, we may unintentionally hurt them, their business, and our profession.
The tax outline introduced by Trump includes new federal income tax rates and a repeal of the estate tax. The outline discusses reducing the current seven individual tax brackets (currently 10, 15, 25, 28, 33, 35, and 39.6 percent) down to three brackets at rates of 10, 25, and 35 percent.
The standard deduction would be doubled to about $24,000 for those married taxpayers filing joint returns. Relief for child- and dependent-care costs would also be included.
The top rate for capital gains would be 20 percent, and the 3.8 percent net investment income tax that applies to income above a certain level would be repealed. Most tax deductions would be eliminated, except for those related to mortgage interest, charitable contributions, and retirement.
The president’s plan would also repeal the estate tax and the individual alternative minimum tax. No detailed description of the legislative proposal or proposed legislative language was provided during the administration’s announcement, which leaves open many questions regarding the application and scope of the president’s proposals.
For example, the proposal does not clarify how the proposed 15 business rate would apply to income from pass-through entities, nor does it indicate whether the 20 percent capital gains rate would also apply to qualified dividends. This is information clients need to know.
Let your clients know you are thinking of them and looking out for their best interest. So, while the most recent tax season is over, be sure to take some time and bring relevant potential tax law changes to your clients’ attention. Don’t wait for them to come to you.
By then, the new zombie may already be on them!