Have Questions on the New Tax Law? Don’t Call the IRS Unless You Have “Basic” Questions!
The Tax Cuts and Jobs Act (TCJA) was passed on December 22, 2017 and is considered the biggest change in income taxes in the last 30 years. Much of the law covered the general concepts, and Congress left it to the IRS to provide guidance as to how to apply the rules.
Need help with tax compliance after the Tax Cuts and Jobs Act? Contact us.
While some of the rules will not impact taxpayers until they complete their 2018 returns, there are some provisions that impact 2017 tax returns that are to be filed within the next couple of months. And trying to get ready 2018 compliance rules are best addressed prior to next year.
The problem? This filing season, the IRS will only answer what it characterizes as “basic” questions about the tax law. The IRS will answer no tax law questions on the phones or in the Taxpayer Assistance Centers for the rest of the year, according to the National Taxpayer Advocate, Nina Olson. "I don’t expect the IRS to give taxpayer-specific advice, but it must explain the basic outlines of provisions so taxpayers can determine whether provisions apply to them and whether they need to seek professional advice with respect to their specific situation," Olson said. When a lesser tax act was passed in 2008, calls to the IRS jumped 125%.
The Treasury and IRS have released their second quarter update to the 2017-2018 Priority Guidance Plan. The updated 2017-2018 Priority Guidance Plan now reflects 29 additional projects, including 18 projects that have become near term priorities as a result of the TCJA. Although IRS officials have said that its updated list is not exclusive, they have emphasized that the items on the list will be its first order of business, which it hopes to get through by July! The problem is that certain items that impact the 2017 returns (e.g. the Sec. 965 deemed repatriation of foreign earnings) are not even on this list; and a tax payment related to Sec. 965 must be made by April 17, 2018.
Part 1 of the updated Priority Guidance Plan contains plans for guidance on 18 targeted areas, including the following:
- Code Sec. 45S business credits with respect to wages paid to qualifying employees during family and medical leave;
- Application of the effective date provisions under Code Sec. 162(m) to the elimination of the exceptions for commissions and performance-based compensation from the definition of compensation subject to the deduction limit;
- Fines and penalties under Code Sec. 162(f) and new Code Sec. 6050X;
- Computational, definitional, and other matters under new Code Sec. 163(j) on the deduction of business interest;
- Bonus depreciation under new Code Sec. 168(k);
- Computational, definitional, and anti-avoidance matters under the new Code Sec. 199A pass-through deduction;
- Adopting new small business accounting method changes under Code Sec. 263A, 448, 460 and 471;
- Implementing changes to Code Sec. 529 college savings plans;
- Implementing changes to Code Sec. 1361 regarding electing small business trusts;
- Computation of estate and gift taxes to reflect changes in the basic exclusion amount; and
- Withholding under Code Secs. 3402 and 3401 and optional flat rate withholding.
What to Do?
Taxpayers will need to consider how they comply when there is limited guidance. This will probably involve a reasonable review of the law (possibly including professional advice) and documentation of the basis for any conclusions reached and action that will be taken. Lack of compliance involving a new provision where no review is taken could result in the assessment of additional interest and penalties.
Contact us if you need tax planning and compliance assistance with your 2017 tax return.
Mia Yun, CPA
Mia Yun focuses on providing international tax services to clients with multi-national interests and family office services to ultra-high net worth families. Contact Mia at firstname.lastname@example.org or 248.244.3013.