How to Guide Your Clients Through Tax Reform Changes
The Tax Cuts and Jobs Act is the largest piece of tax reform legislation in 30 years and was signed into law on Dec. 22, 2017. Although most of the legislation applies to tax year 2018, clients are already starting to ask their tax practitioners questions about the impact to their tax situation. Tax professionals are viewing this sweeping tax reform as both a challenge and an opportunity for their tax practice.
Tax professionals are subject matter experts and should quickly get up to speed on the legislation and the impact on their individual and small business clients. Consider turning the vital tax law measures into layman’s language, and communicating the material to clients and prospects. This can be a service to existing clients and an avenue to grow your tax practice by educating prospects.
Information you can share with clients and prospects:
- Infographic: How Tax Reform Impacts Your Clients
- Tax Reform Law: What Clients Should Know
- Policy Highlights
Various methods of communication include:
- Social media
- Client newsletters
- Post information on firm website
- Meet with clients
- Conduct presentations, either in person and/or via webinar
You may think about expanding your practice beyond providing just tax compliance services and into tax planning. This new tax reform legislation presents the perfect opportunity. During the course of the tax year 2017 engagement (January – April 2018) and into the summer, practitioners may start by showing their clients a year-over-year comparison between 2017 and 2018. The 2018 column could apply the tax reform changes to 2017 tax data.
Tax professionals can look at their clients’ 2018 tax situations and determine the impact and planning opportunities/tax savings the tax reform measures provide, such as the following:
- Complete Form W-4 to make sure withholding allowances are right (standard deduction and child tax credit increased; personal exemption eliminated; and other changes).
- Review 2018 estimates with your small business/self-employed clients (new 20 percent deduction on qualified business income and lower corporate tax rate).
- Consider bunching itemized deductions and taking the standard deduction every other year for optimization.
- Plan for new alimony rules that take effect in 2019.
- Plan for capital property purchases (bonus depreciation, Section 179 deduction and vehicle limits have all increased).
- Optimize tax savings through choice of entity (tax rates have been reduced for sole proprietorships, flow-through activities and C corporations).
One More Step
Think about this broad-based tax reform as an opportunity to enhance your standing as your clients’ trusted advisor. To set yourself apart from the competition, circulate and educate your clients and prospects about the latest tax law changes. You may also look their individual tax situations, crunch the numbers and explore planning opportunities that surface, such as revising income tax withholdings and estimates for 2018.