Hard to decode: Preparers discuss the TCJA’s biggest challenges

As the Tax Cuts and Jobs Act begins the march toward its second full filing season, preparers have had plenty of time to recognize how much reform accomplished its stated goal of simplifying the tax system.

The answer: not much. Here are what preparers claim are the biggest challenges of the TCJA so far.

Line by line
House Ways and Means Committee chairman Kevin Brady, R-Texas, holds a sample postcard showing a simplified tax form as House Speaker Paul Ryan, R-Wis., looks on
“Just learning all the new forms!” said Terri Ryman at Southwest Tax & Accounting, in Elkhart, Kansas. “The postcard is definitely a joke. And I’m glad to hear that it will be gone for 2019. It’s so difficult to review with clients, I just quit reviewing the form itself and went to the prior-year comparison page in my software to compare changes with clients.”
Class is in
“Trying to educate clients of the true impact of tax reform — it’s more than the refund,” said Twila Midwood, an Enrolled Agent at Advanced Tax Centre, in Rockledge, Florida, “as well as trying to obtain our education on this major reform.”
Event horizons
“Planning and compliance,” said Mary Kay Foss, a CPA in Walnut Creek, California. “Planning was difficult in 2018 because we didn’t have all the information to plan for the effect of Section 199A. Some recommended strategies, such as increasing retirement contributions to reduce AGI, also reduced income subject to 199A. That wasn’t clarified until early in 2019. So many states also didn’t comply with the TCJA so it became difficult to project taxable income with different tax regimes. Compliance was complicated because the software companies continued to update their products as new pronouncements came from the IRS — a result would change by recalculating it a week later.”
Withhold on
W-4 2018
“Managing client expectations, gently reminding them that they’ve misunderstood or misapplied information they got elsewhere (or from me),” said New York EA Phyllis Jo Kubey. Also “calculating and adjusting client withholding (for individual clients).”
Qualified — or not?
“Confirming that we classify a business correctly to qualify or not for the 20 percent deduction under Section 199A,” said Gail Rosen, a CPA in Martinsville, N.J. “For most businesses we can determine if their business activities qualify, but for a few it’s somewhat ambiguous.”
Finding reliable sources
Internal Revenue Code books sit during a House Ways and Means Committee markup hearing in Washington, D.C.
EA Debra James, of Genesis Accounting & Management Services, in Lorain, Ohio, is “getting more comfortable with the changes but I am still trying to find a comfort level with software and the way it applies the new rules on returns and tax planners. Also,” she added, “it’s challenging to find research material that’s current and accurate. There was so much speculation, misinterpretation and misunderstanding throughout 2018 that if you Google a question to look for guidance, you’d better be sure that your answers are current and from a reliable source.”
Political lessons
“The code itself and the plethora of sunset provisions and how that impacts the future,” said Morris Armstrong, an EA and registered investment advisor at Armstrong Financial Strategies, in Cheshire, Connecticut. “We need to operate under today’s code, but politics also dictate the code and I have little doubt that should the makeup of the House, Senate and executive branch align with the Democrats, CE providers will make a fortune.”
Immovable objects
The 115th Congress convenes for the first time in 2017
“Intransigence,” said Bill Smith, a Bethesda, Maryland-based managing director for CBIZ MHM’s National Tax Office. “Neither party is willing to budge to get any tax legislation passed. The Democrats felt left out of the process entirely when the TCJA passed, so they are unwilling to help the Republicans clean up the messes caused by the TCJA, or to cooperate with extenders, without extracting a pound of flesh. Republicans know that any tax legislation has to start in the House, so the Senate can’t really push any new ideas or even fixes. Majority Leader Mitch McConnell seems unwilling to bring tax legislation to a vote in the Senate. Democrats running for president have widely divergent sets of proposals, so they’re not going to back something different unless and until they’re no longer candidates.”
Everything old is old again
Capitol Hill-flag
“There’s no consistency in how Congress changes the tax laws,” said Bruce Primeau, a CPA at Summit Wealth Advocates, in Prior Lake, Minnesota. “For example, with all of the tax law changes that just went into effect in 2018, those laws sunset in 2025 and everything reverts back to the way it was in 2017. So just when you’re finally able to master some of the changes, everything changes back.”