Tax Cuts and Jobs Act.
Families First Coronavirus Response Act.
Consolidated Appropriations Act, 2021.
American Rescue Plan Act.
Since 2017, the tax community has seen the enactment of five major laws with significant tax components.
And now - a $3.5 trillion dollar reconciliation package is being drafted that could be a significant reordering of the federal income tax system. It will increase taxes significantly for households making over $400,000 a year while providing significant tax credits and other benefits to households making less than $150,000 per year.
While the tax law typically changes every year, the breadth and depth of all the recent changes is quite profound. It is easy to get lost, be confused, and feel constantly behind the eight ball.
Since another significant bill is starting to take shape, I wanted to give you five ways to manage the potential changes on the horizon:
A bill is not a law; don’t treat it as a done deal. A bill that is a major policy goal of the President and Congressional majority is likely to come to fruition in some form. Track it. See where it goes. Keep informed on what could be in it. Don’t bank on it passing, or assume that any particular provision will be included, until the President’s signature is on it and it becomes law.
Manage client communications surrounding the potential changes. I recommend sending a message to all clients indicating you are watching the legislation unfold on Capitol Hill. If it becomes law, then you’ll let them know as soon as you can on the provisions that impact them, and in the mean time do not take actions now based on what you hear about the bill. Don’t give the details on the proposed bill to your clients — the bill can easily change, and it may not become law in any form.
Have clients in a holding pattern on any major tax moves. We are in a tax landscape right now that has the potential to change both quickly and significantly. Your clients still have plenty of time to take actions before the end of the tax year. See how things shake out before advising actions that could be suboptimal under the new law if it is passed.
Invest in quality continuing education. Each year, every tax professional needs at least six hours of federal tax update, whether required by one’s license or not. When a major tax law change passes, take a course that provides a solid overview of the law from an instructor who doesn’t make up things to fill in the gaps. It is a new law - there will be a lot of unknowns - and that is the only honest and fair way to approach it.
Lean on your tax community (but be cautious about social media). We are here for one another. Use your trusted resources. However, be careful about relying on what you see on social media - there is a lot of misinformation out there now about this bill, and it can easily spread. Trust but verify.
In closing, please do not leave the profession if this bill becomes law (and I’m not intending hyperbole here). I know many of you have fatigue and anger from the last two absolutely miserable tax seasons. You may question your interest in and passion for the tax field. I get it. And if I am being honest, I feel it myself.
Now more than ever, taxpayers at all income levels need your expertise navigating the tax system. They need advice to access significant federal benefits administered through the tax law. Business owners need help with compliance and tax planning to ensure their businesses are as profitable as possible.
All taxpayers — including those at the top — need to know how to legally keep their tax bill as low as possible so that they can build wealth and financial security. As Judge Learned Hand said in Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934):
Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.
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Upcoming Education Events
Compass Tax Educators - Virtual
Gambling Tax Issues - October 21, 2021
Ethics - November 18, 2021 (Panel discussion with Sherrill Trovato, EA, USTCP and Geri Bowman, CPA, EA, USTCP)
C Corporation Tax Planning - December 2, 2021
2021 Tax Update - Individuals - December 9, 2021
2021 Tax Update - Businesses - December 16, 2021
California Society Of Enrolled Agents - Central Coast Chapter - September 22, 2021 - Virtual
American Rescue Plan Act of 2021 (3 CE)
Washington State Tax Consultants - September 29 - October 2, 2021 - Anacortes, WA
Cryptocurrency Taxation (2 CE); Key Court Cases in the Tax Law (2 CE); Tax Planning Strategies for Business and Rental Owners (2 CE); Mastering the Tax Research Process (4 CE); 2021 Tax Law Changes (4 CE)
Sherrill Trovato, EA, USTCP is teaching 8 CE on “Prep to Rep”
New Jersey Society Of Enrolled Agents - October 6, 2021 - Virtual
Employee Retention Credit (2 CE)
Preparing To Practice Before The U.S. Tax Court - November 4 - 6, 2021 - Orange County, CA
AICTP Tax Planning Academy - November 2021 - San Diego, CA
Tax Talk Today - November 16, 2021 - Virtual
Ethics (2 CE)
Arizona Society Of Enrolled Agents - Phoenix West Chapter - November 17, 2021 - Virtual
Entity Tax Return Preparation (2 CE)
Washington State Society Of Enrolled Agents - January 6 - 7, 2022 - Seattle, WA
Federal Tax Update plus additional topics (16 CE)
Michigan Society of Enrolled Agents - January 10, 2022 - Novi, MI
Federal Tax Update (8 CE)
CSEA - North Bay Chapter - January 14-15, 2022 - Marin/Sonoma County, CA
Federal Tax Update (6 CE); California Tax Update (2 CE)
CSEA - South Bay Chapter - January 20, 2022 - Los Angeles County, CA
Federal Tax Update (8 CE)