Lingering limbo businesses uncertain about tax law impact – startribune.com gas oil ratio chainsaw

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But a survey of 603 owners taken in early April by Wells Fargo and Gallup showed many owners were still in the dark. Thirty-nine percent said they don’t know how the law will affect their companies. A third said it had already helped their companies or would do so, and 27 percent didn’t expect it to benefit their businesses.

For owners of pass-through businesses — sole proprietors, partners and owners of companies structured as S corporations — the uncertainty around the 20 percent deduction comes from the list of ways they could be disqualified. For these companies, the business income is “passed through” to the owners’ 1040 forms, and they pay tax based on individual rather than corporate rates.

Certain business owners like lawyers, accountants, doctors and consultants won’t qualify for the full deduction unless their taxable income is below $157,500 for single filers or $315,000 for joint filers, and the amount of the deduction will decline as taxpayers’ incomes rise. The same goes for business coaches, public speakers, therapists — according to the law, any trade or business whose principal asset “is the reputation or skill of one or more of its employees.” But the IRS has yet to weigh in on a number of issues, including the calculations businesses must make to determine the income that can qualify for the deduction.

“The lack of clear information available to determine exactly what applies to my situation has been both confusing and frustrating,” says Ma, who lives in Point Richmond, Calif. He’s not sure as he makes quarterly estimated tax payments whether he’s overpaying or underpaying. He also wonders as he takes prospective clients and customers out for meals whether he’ll be able to deduct them.

The uncertainty as the IRS writes the regulations could last into 2019 and beyond. “Regulation projects can range from months to years — if ever finalized. And each project takes a different amount of time,” says Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

Many accountants have started making educated guesses. CPA Angela Dotson expects most small businesses to pay less in taxes. Owners who have multiple businesses will have more uncertainty, but “the bread-and-butter companies that hire most people, they’re not going to have the most issues,” says Dotson, who’s with the accounting firm Aprio in Atlanta.

But a survey of 603 owners taken in early April by Wells Fargo and Gallup showed many owners were still in the dark. Thirty-nine percent said they don’t know how the law will affect their companies. A third said it had already helped their companies or would do so, and 27 percent didn’t expect it to benefit their businesses.

For owners of pass-through businesses — sole proprietors, partners and owners of companies structured as S corporations — the uncertainty around the 20 percent deduction comes from the list of ways they could be disqualified. For these companies, the business income is "passed through" to the owners’ 1040 forms, and they pay tax based on individual rather than corporate rates.

Certain business owners like lawyers, accountants, doctors and consultants won’t qualify for the full deduction unless their taxable income is below $157,500 for single filers or $315,000 for joint filers, and the amount of the deduction will decline as taxpayers’ incomes rise. The same goes for business coaches, public speakers, therapists — according to the law, any trade or business whose principal asset "is the reputation or skill of one or more of its employees." But the IRS has yet to weigh in on a number of issues, including the calculations businesses must make to determine the income that can qualify for the deduction.

"The lack of clear information available to determine exactly what applies to my situation has been both confusing and frustrating," says Ma, who lives in Point Richmond, California. He’s not sure as he makes quarterly estimated tax payments whether he’s overpaying or underpaying. He also wonders as he takes prospective clients and customers out for meals whether he’ll be able to deduct them.

The uncertainty as the IRS writes the regulations could last into 2019 and beyond. "Regulation projects can range from months to years — if ever finalized. And each project takes a different amount of time," says Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

Many accountants have started making educated guesses. CPA Angela Dotson expects most small businesses to pay less in taxes. Owners who have multiple businesses will have more uncertainty, but "the bread-and-butter companies that hire most people, they’re not going to have the most issues," says Dotson, who’s with the accounting firm Aprio in Atlanta.