Tax Cuts and Jobs Act: Finding a Loophole

          With every year, there are new and inventive ways that are found to avoid paying the full Tax obligation owed. In the time before official guidance from the IRS is issued it can be a wild time of creative “interpretations”. When new Tax Laws are passed if one door to a loophole is closed, then a window can be opened. These are the times we find ourselves in with the Tax Cut and Jobs Act. It is especially true when it comes to what is known as the 20% pass-through deduction and some of the words used to define it.

          This deduction is supposed to also apply to “service professionals”. What does that mean? There are some particular industries mentioned like health, athletics, and performing arts. In addition, there is an exclusion that applies to a business where its largest value is the “reputation or skill” of the owner or the employees. Do you understand? Most professionals are not sure and when there is a vacuum of knowledge, many try to rush in and fill it.

          There are a variety of strange ideas that are being proposed about how to take the best advantage of this deduction. Some are promoting the idea of creating many companies and bringing them together as one and claim to be in a profession that qualifies for the deduction. Or create different companies to try and get some of the income through. If this sounds confusing, it is. Right now, nobody knows what is going to work. When IRS regulations are put in place, it will become a little easier to understand. These strategies will not lead to any lasting harm as long as there is no lying involved. However, it may be best to exercise some patience and wait for the guidelines to be established before making your move.

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