Taxpayers, accountants still parsing new law

Jan. 14--Even as Tony Cirone Jr. and his CironeFriedberg colleagues fielded a flood of client queries in December following passage of the Tax Cuts and Jobs Act, the partners were weighing a question of some significance for their own accounting firm -- should they convert to a corporate structure to take advantage of the new federal rate on corporate income?

For a variety of complex reasons it would take an accountant to parse through, the answer was no -- but the fact that they were asking the question at all is one telltale of the impact of the federal tax cuts entering 2018, whether for individuals or businesses.

With the IRS publishing on Thursday newly revised tax withholding tables under the law, taxpayers are getting a first inkling of their new bottom line on a week-to-week basis. The law produced new tax brackets that will save many money, but with many seeing those gains offset by changes to deductions and credits that helped offset amounts owed the IRS in prior years.

In the December rush by Congressional Republicans to ready the bill for President Trump's signature, many taxpayers were left bewildered with the array of changes that could have a major impact on life and financial planning this year and in the decade to come.

At CironeFriedberg, which has more than 50 people at offices in Bridgeport, Stamford, Bethel and Wilton, partners and staff accountants began scrambling beginning in late November as calls and emails poured in from many of the firm's 5,000 clients, as Cirone recalls it in his role as co-managing partner alongside David Zieff.

"Tax season really started a month early this year for most CPA firms, because we had a lot of tax projections we had to do for both businesses and individual clients to make sure we took advantage of the changes," Cirone said. "We worked the weekend before Christmas (and) both days before New Years, because you had that December 31, drop-dead deadline. You had to get it done."

'It's got people talking'

Bill Conron, a partner in the Norwalk office of New York City-based Citrin Cooperman, said he fielded plenty of questions as well in December -- particularly from business owners weighing whether to remain "pass-through" entities in which business income taxes are collected via individual IRS forms, as the case with limited liability companies or partnerships. Subject to a range of complicated considerations, businesses with a choice in the matter considered a new, 20 percent deduction on pass-through income for tax purposes, versus converting to corporate form to take advantage of the new 21 percent income tax rate, previously at 35 percent.

"The pass-through deduction ... (was) something that people weren't expecting to have," Conron said. "People are trying to see if they qualify for it."

Paul Piasecki took large volumes of inquiries in December, as well, at his Norwalk firm Piasecki & Co. CPAs, particularly related to the prepayment of state income and real estate taxes as newly adjusted standard deductions wiped out tax advantages enjoyed by some Connecticut residents. While the volume of inquiries subsided somewhat the first week of January, he is expecting a resumption of activity as people dive deeper into individual tax planning considerations like tax credits covering children or the loss of deductions for alimony that take effect next year; as well as business concerns.

Piasecki said even if taxes go down for many, he is not seeing much evidence of another oft-stated goal of Republicans in pushing through the law -- simplification of the tax code.

"There is so much devil in the details here," he said.

After a month poring through the enabling legislation and the resulting bill, accountants will be out in force in the coming weeks, with many firms and business groups scheduling public forums to review specific elements of the law. Citrin Cooperman's Conron said he has three or four panels lined up in the coming weeks.

"It got people talking more about taxes," Conron said. "We're popular now."

[email protected]; 203-842-2545; @casoulman

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