Seven Reasons Why You Still Need to Care about Tax Reform

July 2019 | Article

Over the past year we’ve helped you understand tax reform and the impact it has on your business and individual situation. You may have already benefited from some of the new opportunities, credits and deductions. Or, you might have had your return extended awaiting additional guidance on certain tax reform provisions.

However, one thing is becoming certain for us and many businesses—as new guidance becomes available, continued tax planning is the key. The impact of tax reform and the conversations surrounding the legislation continue, and will continue, long past the 2018 tax return filings.

Why Tax Reform Is Still Important
But perhaps you need more persuading? We recently asked our tax partners a simple question: Why should clients still care about tax reform?

Here’s the top seven responses from those conversations:

  1. The impact of tax reform is not just a one-year thing. Strategies that make sense long term are much more critical than short-term solutions.
  2. Tax reform increased the need for tax planning by many of our Schedule F (farming) clients.
  3. It is important that pass-through clients, such as partnerships, S corporations and trusts, review decisions that were made to ensure those decisions will have the correct impact on going forward.
  4. Understanding the limitations on the qualified business income (QBI) deduction and itemized deductions will be important tax planning items for many years.
  5. Tax planning is an integral part of overall financial planning.
  6. Though many tax reform issues remain unresolved, tax planning should be done on a regular basis to make sure prior tax planning still aligns with current tax information and contemplated transactions.
  7. Tax planning is critical for clients who want to get the most out of what they currently have, or do.

Real Benefits of Tax Reform
Did we see clients benefit from tax planning and other specialized conversations surrounding tax reform? Yes, we did. The following outlines a couple examples.

  • An optometric client switched to cash basis reporting and had a reduction in taxable income of over $500,000.
  • A client was having cash flow issues paying taxes on S corp earnings. The reason, the S corp wasn’t paying out enough in distributions to cover the taxes. A solution came from tax reform through the qualified business income deduction providing a 20 percent benefit, which allowed for a higher S corp distribution that was then taxed at a lower tax rate at the shareholder level.

On a wider basis, through advanced tax planning, many clients benefited from knowing the new rules by applying:

  • A reduction in tax rates
  • The change to the cash method of accounting
  • QBI deduction benefits
  • Expanded expensing for asset purchases

Want to learn more about how you can start or continue to benefit from tax reform, now and into the future?  Contact your Eide Bailly professional to request a planning conversation or visit our Tax Reform website to learn more.

Stay current on your favorite topics

SUBSCRIBE

Applicable Services

Take a deeper dive into this Insight’s subject matter.

Tax