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Brief breather for CPAs

MWE Headshots Thumbnail CraigSavelle - Brief breather for CPAsBobe website - Brief breather for CPAsTax season started earlier than usual this year, as our firm and clients began grappling with the most sweeping overhaul to the tax code in three decades. Long Island Business News caught up with Managing Partner Craig Savell and Senior Manager Jennifer Bobé to talk about the most recent tax season and how they are advising clients during this time of upheaval and uncertainty.

LIBN LOGO hi res Nov20101 300x80 - Brief breather for CPAs

For businesses, there are also moving parts with regard to the rules for qualified business income and interest deductions, said Craig Savell, managing partner of Margolin, Winer & Evens in Garden City.

Accountants have had to “stay on top of everything that’s going on in real time and advise clients, knowing we don’t have all the information,” said Jennifer Bobé, a senior tax manager at Margolin, Winer & Evens. “The government is still figuring out how to write the rules, and we have to make sure clients stay abreast of the changes as they happen.”

For instance, in response to the federal government imposing a $10,000 limit to deductions on state and local taxes, “New York State is looking to change some rules to try to facilitate residents getting the benefit of certain itemized deductions that they previously received, and the general consensus is that the federal government will respond,” Savell said. “It will be a ping-pong game going back and forth, with items up in the air for a long period of time. People are looking for definite answers, but things are still changing.”   Read More>>>


MWE LLP Navigating the NewTax Law White Paper FINAL5 - Brief breather for CPAs

Read: With New 21 Percent Corporate Tax Rate, S-Corps Are Taking a Second Look at C-Corp Status

Jude Coard often likens tax season to a trip to the dentist. “It’s never pleasant,” said Coard, who works in Jericho as Berdon’s partner-in-charge of tax services for Long Island. “But it wasn’t as bad as it could have been.” Part of the reprieve came courtesy of the calendar. “We had a couple of extra days, which helped,” he said. Tax season was due to end April 17, because April 15 fell on a Sunday and April 16 was a holiday in Washington, D.C. Technical difficulties with the IRS website then extended the deadline an extra day. Besides stretching a few days later, tax season started earlier than usual, as CPAs and their clients began grappling with the most sweeping overhaul to the tax code in three decades. Taxpayers in December bombarded their accountants with questions ranging from whether they should prepay their real estate taxes to get the payments into tax year 2017, to whether they should change their business entity to a C-corporation to take advantage of the new 21 percent tax rate. “This tax season seemed really long because we were looking at 2018 and trying to understand the impact of tax reform from December forward, and that never let up,” Coard said. “It only accelerated.” Though tax reform is effective with tax year 2018, it nonetheless impacted the filing season for tax year 2017. In particular, decisions had to be made for business owners and others who make estimated quarterly tax payments. “Business owners in particular had questions about how tax reform would affect their 2018 taxes,” said Sean Kelly, a certified public accountant at Markowitz, Fenelon & Bank in Riverhead. “We ran projections for certain business owners to see what they would owe next year, assuming their situation stays the same, so we could adjust their estimated tax payments throughout this year.” There are two ways of making estimated tax payments, Coard said. “Either you can pay 110 percent of the prior year or 90 percent of the expected tax of the current year,” Coard said. “We had to look at which way was better – but we’re still grappling with some unanswered questions. It’s frustrating running different scenarios based on what’s known today. Clients want to be certain.” For instance, there’s a lack of clarity regarding meals and entertainment, Coard said. Both were 50 percent deductible prior to tax reform, but a deduction can no longer be taken for entertainment expenses. “At first it looked like meals would still be 50 percent deductible,” Coard said. “But questions have been raised about whether meals fall under entertainment, and it looks like they might not be deductible after all. “Those who are trying to capture that data for 2018…it can be a significant number, and clients are asking us questions that we don’t have 100 percent clarity on,” Coard said. “We’re advising them based on what we thought the intent of the law was, and we’re constantly monitoring what the IRS is going to come out with. It’s time-consuming.” For businesses, there are also moving parts with regard to the rules for qualified business income and interest deductions, said Craig Savell, managing partner of Margolin, Winer & Evens in Garden City. Accountants have had to “stay on top of everything that’s going on in real time and advise clients, knowing we don’t have all the information,” said Jennifer Bobe, a senior tax manager at Margolin, Winer & Evens. “The government is still figuring out how to write the rules, and we have to make sure clients stay abreast of the changes as they happen.” For instance, in response to the federal government imposing a $10,000 limit to deductions on state and local taxes, “New York State is looking to change some rules to try to facilitate residents getting the benefit of certain itemized deductions that they previously received, and the general consensus is that the federal government will respond,” Savell said. “It will be a ping-pong game going back and forth, with items up in the air for a long period of time. People are looking for definite answers, but things are still changing.” The complexity of tax reform meant staff put in more hours than usual during the recent busy season – “time devoted to trying to understand the law and running projections for larger clients,” Coard said. As the gray areas remain gray, accountants are likely to remain busier than usual during the next three quarters. “For those who are making estimated taxes, we will want to pay much closer attention than usual to make sure they’re on track throughout the year,” Kelly said. “We’ll revisit it each quarter, to make sure they’re not paying more than they are supposed to be.” And many clients went on extension, pushing the filing deadline to Oct. 15. “We’ll be doing this again in a few months,” Coard said.
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