Making the Most of Tax Season

March 6, 2018 Firm News

With tax season in full swing, companies and individuals are scrambling to make the most of their returns in light of the recent reform. From employee benefits to privacy and data security, there’s a lot of new information to sift through. Our attorneys have compiled a list of key considerations for filing in 2018 and beyond.

Time for a Tune-Up: Partnership and LLC Agreements

New partnership audit rules went into effect Jan. 1, 2018, which change from a partner/member-based audit regime to an entity based one; tax deficiencies and payments are now made at the partnership level instead of at the individual partner level. To account for these new rules and regulations, agreements should be reviewed and amended to address: (1) Appointment, resignation, responsibility, authority, liability and more for the Partnership Representative (which replaced the “tax matters partner” and is the only party the IRS will communicate with during an audit); (2) whether to elect out of the new rules and to push the tax liability out to the partners; (3) how to deal with possible economic distortions caused by a tax liability; and (4) how to deal with partners who were members during the audited year but are no longer members when the audit and tax liability arise.

Rise of C-Corporations?

The Tax Cuts and Jobs Act has set the corporate tax rate at 21 percent (down from 35 percent).  In addition, the alternative minimum tax (AMT) has been repealed for corporations. It may make sense to form or convert your business from a flow-through entity (S-corporation or entity taxed as a partnership) to a C-corporation to take advantage of this new tax rate.  There are a number of factors to consider when making this decision but it is something worth exploring on a case-by-case basis as it could result in significant tax savings for you and your business.

Tax Extender Provisions

On Feb. 9, Congress passed, and President Trump signed into law, the “Bipartisan Budget Act of 2018,” which retroactively extends some 30 tax provisions (commonly known as extenders) which had expired at the end of 2016. When having your 2017 taxes prepared, see if any of the individual and business expenses covered by these extenders are available as deductions on your 2017 return.

Withholding Tables – In Use Now!

The 2018 withholding tables, which were issued later than usual due to enactment of the new tax law, must be used by employers as of Feb. 15.  These tables implement the major changes made under the act to income tax rates, increased standard deduction and elimination of personal exemptions.

What Does it Mean for Your Compensation and Benefit Plans?

The Tax Cuts and Jobs Act signed into law in December has a number of implications for employers related to compensation and employee benefit plans. Among those, repeal of the individual mandate has been highly publicized. The Affordable Care Act (ACA) requires individuals to maintain minimum essential health coverage or pay a penalty when filing their federal income tax return. The individual mandate will remain in effect through 2018 but is repealed starting in 2019. The ACA also imposes penalties on large employers that fail to offer affordable minimum essential health coverage to full-time employees. The employer mandate penalties are not affected by the Tax Reform Act. For an in-depth list of changes – including those related to excise taxes on compensation, transportation fringe benefits, paid family and medical leave, and more – visit our For Your Benefit blog.

Tax Fraud on the Rise After Equifax Fallout

The fallout from the Equifax breach is broad-reaching, and for businesses and consumers alike, concerns of tax fraud are mounting. As the April deadline approaches, it’s important for businesses to take caution and educate employees about tax fraud and risk management. Trial attorney Jeff Schultz was recently quoted in a Fox Business article about tax fraud and noted several important considerations for consumers. Jeff also shared tips from a business perspective. Read more.

Considerations for Estate and Gift Tax

With the focus on planning under the Act, it is worth slowing down to remember that events in 2017 are governed by estate and gift tax law in effect in 2017. April 15 may be important to these events. Consider: Is there income in an irrevocable trust that should be distributed prior to March 6, 2018?  Did the grantor of a revocable trust pass away and the trustee wants to make a Section 645 election to treat and tax the trust as part of the estate?  Did you make any gifts or other transfers that should be reported on a gift tax return?

Let us know how our experience can benefit you – give one of our Tax attorneys or your regular AT contact a call today.