How Accounting Could Change in 2017
The accounting landscape is always changing, and we must adapt with it to help our firms grow and succeed. Therefore, it’s important that we anticipate and forecast any changes for the upcoming year, and plan accordingly.
Here are three ways accounting could change in the next year:
#1: Corporate & Business Tax Reform
It appears that tax reform will be top priority in 2017. This could reduce the corporate tax rate to as low as 15 percent, down from 35 percent. While some expect the actual rate to end up closer to 25-28 percent, we will definitely be seeing significant cuts in this area.
If a unified business rate approach is taken, it could mean that active business owners of pass-through entities (e.g., S corporations, LLC, partnerships) would pay the same 15 percent rate. This would be a dramatic reduction for most business owners. For comparison, a taxpayer earning business income currently pays a top tax rate of 39.6 percent. Since the majority of businesses are incorporated as pass-through entities, this is a change that is likely to affect your clientele, and therefore, your approach.
#2: The Affordable Care Act
While the Affordable Care Act will in all likelihood be replaced, repealing it could take time. Thus, your clients should operate like it is still in full force, until things become clearer. Remember that there is a requirement for employers with 50 or more full-time employees (FTEs) to offer health insurance to full-time workers, or else pay a penalty. For employers with 50 or more FTEs who don’t provide coverage, the penalty assessed is $2,000 per full-time employee (excluding the first 30 full-time employees). It is possible that the penalty will not be enforced, but it’ll be up to each of your clients to decide if that’s a risk they are willing to take.
It is expected that repealing and replacing the Affordable Care Act will take at least the entirety of 2017, and likely extend into 2018, due to the complexities of the legislative process. Accountants should watch how this process unfolds closely to ensure they provide sound strategy and bookkeeping, particularly for 2018 planning.
#3: Client Relations
While this point is not tied to any policy changes, your clients may have a different mindset going into 2017. You should not be surprised to see more clients pushing you to be more aggressive with their tax filings. With tax cuts on the horizon, clients will be looking to further maximize their savings and ask you to take a creative approach to improve their cash position. Be prepared to accommodate this, while continuing to follow ethical standards. In the case your clients have a strong need to shore up their cash position, maybe suggest they look into a business line of credit, or other working capital financing solution, as an alternative.
Given the flood of legislative changes in 2017, your clients will be looking to you for guidance and assurance. Let them know that they should continue with business as usual, as the major changes will not be clear until the middle to end of the year.