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Banking & Finance

Firms Navigate Latest Tax Law Changes

By Jenny Callison, posted Jun 7, 2019
During tax season this year, media reports indicated that the many changes in the Tax Cuts and Jobs Act of 2018 were producing confusion among individuals and businesses as they prepared their tax returns. Did this scenario play out among business filers locally?
 
Rob Wagner, a tax partner with the Wilmington office of RSM US LLP, said there were many provisions of the new tax law that were not fully explained in the tax code, which made advising business clients to file for extensions a prudent course. He filed more extensions for clients this tax season than he has before.
 
“With any major tax law, there are what are called technical corrections bills,” he said. “Because the [Tax Cuts and Jobs Act] was put together so quickly, Congress [can] follow up with law corrections. We are waiting on that. There will continue to be regulations issued, first in proposed form and later in final form.”
 
In fact, there are proposed corrections before Congress now, which, if passed, could change provisions of the new tax code and affect a business’s tax return, Wagner said.
 
There also remains uncertainty about potential deductions for business losses from the 2018 hurricanes, Wagner added.
 
“With Hurricane Florence, the Congress has talked about changing some of the tax law to allow for a deduction. They have talked about it but not acted on it,” he said, explaining that such a deduction could have an impact on some of his clients’ tax liability.
 
Filing for an extension allows a business and its tax professional to consider and plan as well as to come to a complete understanding of the tax code.
 
Michael Burton, a CPA with Earney & Co., said he and his colleagues in the firm did have their struggles with the new tax law and tax software that reflected the uncertainties in the law, but they had largely worked through them. Still, the new software did make things more difficult this tax season, he said.
 
“Software guys aren’t CPAs or accountants, so there are going to be hiccups,” Burton said. “Usually there are only about 100 changes [in the tax code] per year; this year there were maybe a thousand.”
 
CPA Chris Massey heard about tax law and tax software headaches at firms elsewhere, but he said because his clients at Adam Shay CPA are individuals and small business owners, he was able to guide them through the applicable changes without too much difficulty.
 
Small business owners do file a business return, but the owner pays the tax liability through his or her personal return.
 
“There is a deduction of 20%, so only 80% of the business income is subject to tax,” he said.
 
Massey did, however, file extensions for clients who suffered hurricane- related losses.
 
Clement Goodson, owner of Goodson & Taylor, said he and other CPAs in his firm have used the same tax software for about 15 years for their clients, who are mainly individuals and small business owners.
 
“Extensions are not our experience,” he said. “We stay on top of [the software], and the first couple of weeks of the season any problems are corrected.”
 
He did say that he and others in his firm are tracking the progress of Senate Bill 617, currently under consideration in Congress, that would renew some expiring provisions of the 1986 tax code and would provide disaster tax relief. He gave the bill an 85% chance of passing.
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