Now that we’ve rolled over into the new year with freshly minted Tax Reform officially on the books, many small business owners are excitedly shuffling in their seats hoping to learn the best strategy to leverage this new tax code to their company’s advantage in 2018. For the moment, however, the best guidance advisors can (and should) be giving their clients is, as the famous British slogan says, to “Keep Calm and Carry on.”
Obviously, we know that’s not what the anxious are hoping to hear. However, as we’ll soon make clear—especially for the near term—it’s the most honest outlook you’ll get.
With that said, there are a few smart steps businesses can be taking now, as well as a few pitfalls to avoid as this tax cacophony continues. So, as you get your 2018 tax preparation underway, we’ll offer up a few things to keep in mind:
What we “know” is that your tax rate will be lower… probably.
The most important thing you can do to prepare yourself for 2018 taxes is to sit down with your trusted advisor and start estimating.
For many, income tax rates have lessened significantly. For others— “service providers” like lawyers, doctors, accountants, consultants and some others—it’s possible that this bill may turn out to be more of a kick in the teeth, fiscally speaking. That may not wind up being the case, but we’ll talk more about that shortly.
Right now, your best bet is to start getting prepared just as you always do; and for both you and your advisor to be on the lookout for a curveball or two. Because…
Anyone claiming to know exactly what’s coming is lying… or just plain wrong!
As an addendum to the above “keep calm and carry on” advice, right now, we’re also strongly advising our own clients to be wary of anyone in the market who claims to have silver-bullet solutions that unlock this new tax bill’s potential. Chances are, they’re either dead wrong or lying (or both) and here’s why….
No one has seen anything like this since the Reagan Administration.
Right now, any tax advisor worth their salt will tell you that this new code—though it contains potential advantages for some small business—is unlike anything they’ve dealt with since 1986. As a result, all of the guidance they (and everyone else) has been working from for the last 30 years—the strategies, precedents, tricks, etc.—has all flown out the window. Some time is going to have to pass before people begin to untangle the tax code. Until then, they’re all watching congress to learn what comes next. Because…
The Tax Code isn’t actually finished.
If you were watching the news in early December, you may have seen some articles discussing the scores of technical corrections expected to follow the 2017 Tax Bill.
As is often the case, Congress hasn’t appeared to be in any hurry to push those corrections through… yet. What may spur them to action however, are those tax ramifications we discussed above for folks like lawyers, doctors, accountants and consultants. There are an awful lot of lawyers in Congress for them to just leave this legislation that vague. It’s probably best to stay tuned.
The long and the short of it is
Right now, most people are worrying about getting their 2017 taxes filed. And, from a tax standpoint, the tape is going to have to roll forward a bit before the 2018 picture comes into sharper focus.
In the meantime, schedule a time to sit down with your tax advisor. And if they greet you with a great big grin and tell you they’ve got the new tax code figured out, find a new one.