Alan H. Litwin | Managing director, Khan, Litwin, Renza & Co. Ltd.
1. What’s the atmosphere been like at KLR since the new tax law passed? It is certainly hectic as we try to digest tax reform and what it means to our clients, while at the same time gearing up for another busy season.
2. What are some recurring questions you’re hearing from clients?
• Whether they should operate their business as a C corporation rather than a pass-through (S corporation, LLC, partnerships, self-employed).
• For service organizations that are pass-through entities, the big question is whether they will be able to benefit from the Qualified Business Income Deduction.
• Corporate clients that operate internationally and are impacted in 2017 on the ... repatriation tax are questioning the impact on them. There are also a variety of other international tax rules introduced that could impose significant additional burdens.
• On the individual side, we’ve done a number of projections for clients to give them a sense of how they will be impacted next year once the law is fully implemented.
3. What’s been most challenging about reacting to the new law? Mainly timing as we enter a new tax-filing season.
4. Are there clear winners and losers? Certainly, large corporations benefited greatly. The cut in the corporate tax rate from 35 percent to 21 percent was really the centerpiece of tax reform, and it seems to be having a positive effect. For our individual tax clients, I think top earners will benefit with the cut in the top rate from 39.6 percent to 37 percent. Those taxpayers with lower income will also benefit since the standard deduction now has doubled. The lack of state-tax deductions will be costly in the Northeast, and other high-tax states. The residential real estate industry took a hit with the limitation of mortgage-interest deductions and the cap on property-tax deductions. In addition, there may be a negative impact on charitable giving, with the doubling of the standard deduction and the fact that many clients will no longer need to itemize.
5. What can business owners do to better understand how this impacts them? We are all learning the impact of this new law at the same time. There is nothing more valuable than sitting down with a tax adviser who knows your personal and business situation and who is well-equipped to study and interpret how tax reform will likely impact you and your business.
