It's the busy season at MBS Accountancy Corp. in Fresno, made busier by changes to the tax code. Photo by Frank Lopez
Written by Frank Lopez
While the effects of the 35-day partial government shutdown were felt across all federal agencies, the impact on 2018 income tax might’ve been the most worrisome for the White House and taxpayers alike.
Last year was the first under the Tax Cuts and Jobs Act, the biggest overhaul of the tax code since 1986. Though the shutdown is over and the IRS is back at work, The National Taxpayer Advocate, a government watchdog group, has stated that it will take at least a year for the IRS to return to normal operations.
Days before the announcement that the federal shutdown was over, Cassidy Jakovickas, president of MBS Accountancy Corp. in Fresno, said that the shutdown had left accountants in the office with no help from the IRS to navigate the new tax code.
“This is the biggest tax overhaul in 30 years, and as of right now we can’t get through to the IRS to ask any clarifying questions that we need,” Jakovickas said last week. “We’re managing, but sometimes you need to hear it from the horse’s mouth and we can’t do that right now.”
IRS workers reportedly returned to the office last week with a backlog of 5 million unanswered pieces of mail.
MBS specializes in tax services for business owners and nonprofits. Jakovickas said that under the new tax laws, that about 95 percent of his clients are going to see a lower tax bill.
The tax overhaul created a new 20 percent pass-through deduction – business income that you report on your personal income taxes. Since most of MBS’s clients are S corporations, a “small business corporation,” and LLCs, they are getting an additional 20 percent rate deduction.
Overall, each one of the tax brackets are about a couple percentage points lower than they were in 2017.
“When you combine the fact that they’ve got a higher deduction, and lower tax rates, most of our business owners that we are seeing are saving,” Jakovickas said.
Jakovickas noted that tax reform is not a tax simplification. Its actually more complicated for CPA firms that focus on business owners because of a new calculation that must be included, as well as new forms, so there is a stress for his employees to keep educating themselves on the new code.
Another benefit for business owners under the new law comes from a 100-percent bonus depreciation, which allows businesses to write off the entire cost for vehicles and equipment on the first year versus depreciating it over several years.
At the Fresno office of national accounting firm Moss Adams, Partner Chris Morse said that while the shutdown did leave many accountants trying to navigate the new tax codes, they kept moving forward.
Morse said that individuals and business owners would be advised to take note about the widening of the tax bracket, new depreciation codes and to keep in touch with their CPA.
You want to reach out to your CPA,” Morse said. “ You should have conversations with them in November or December and have some tax planning available. Get your information into your CPA early. It will take a little bit longer for a turn around because there are provisions people need to be thoughtful about. Ask questions.”