Free Daily Headlines :

  • COVID-19
  • Vaccine Info
  • Money
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Vaccine Info
    Money
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

CT CPA’s warn of dire impact of new federal tax plan

  • Money
  • by Ana Radelat
  • December 7, 2017
  • View as "Clean Read" "Exit Clean Read"

IRS

IRS Form 1040 tax return

Washington – Connecticut’s accountants are frustrated that they can give clients only limited advice about a massive federal tax overhaul underway in Congress, and some predict there will be more losers than winners among individual taxpayers in the state.

“They are likely to see their federal taxes increase next year, and they should be aware of that,” said Bonnie Stewart, executive director at the Connecticut Society of CPAs.

Stewart said the state’s certified public accountants are being deluged by clients, both business owners and individuals, asking how they would fare under the new tax bill.

“The calls are coming in to accounting offices across the state,” she said.

But without a final bill, there is limited information the state’s accounting professionals can give clients.

“On the individual side, there’s not great news for Connecticut residents,” Stewart said, but the tax overhaul may be “more positive on the business side.”

As far as individuals, Stewart said she cautions against buying a new home or making another large financial decision before the House and Senate negotiate a final bill that reconciles differences in the separate bills each chamber has approved.

Still, that final bill is likely to hurt many individual taxpayers in Connecticut, and other states with high state and property taxes, like California, Maryland and New York, whose taxpayers have benefited from deducting the cost of those levies on their federal tax forms.

The reason the state’s CPA’s are taking a pessimistic tone with many individual taxpayer clients is the House and Senate tax bill’s elimination of the deductibility of state and local income tax and it’s $10,000 cap on the deductibility of property taxes.

Andrew Lattimer, a CPA at BlumShapiro, said he’s telling Connecticut clients to pay property taxes due early next year before Dec. 31, so they can deduct them under current IRS rules. The new tax bill would not take effect until the 2018 tax year.

Stewart recommends Connecticut residents pay any personal property taxes on newly purchased cars, boats, motorcycles and trailers before the year’s end.

“Any taxes that can be paid in 2017 should be paid in 2017,” she said.

Lattimer said taxpayers who may benefit from a final tax bill’s lower rates on individuals may want to “push income from 2017 to 2018,” that is, ask their companies to delay year-end bonuses and other payments.

But the problem for CPA’s like Lattimer is that it’s hard to tell right now whether a client will benefit from a lower rate in the tax bill. The House bill shrinks the current tax brackets from seven to four, while the Senate plan would keep seven brackets but lower the rates on some of them, especially on those earning $500,000 to $1 million.

The Senate also would reinstate the 10 percent bracket, which the House eliminated, and would lower the highest bracket from 39.6 percent to 38.5 percent.

IRS form 1040 schedule A: Itemized deductions

IRS form 1040 Schedule A: Itemized deductions

Both the Senate and House bills would lower the top corporate rate from 35 percent to 20 percent. But the Senate bill implements the cut in 2019, while the House bill initiates the new rate next year.

Lattimer said there are other changes in the tax bill, both good and bad for corporations.

On one hand, big companies would be limited in the amount of interest they could deduct, on the other the tax bills would further improve depreciation rules, which Lattimer said “are already very favorable right now.”

Partnerships, sole proprietorships and limited liability companies in Connecticut, so-called pass-through businesses that are now taxed at the individual rate, may benefit from the House and Senate plans.

But the House and Senate have taken different approaches to lowering taxes for  pass-through businesses. The House bill would cap their tax rate at 25 percent, the Senate bill would allow the businesses to take a 23 percent deduction on their income, but continue to tax these businesses at the individual rate.

And law firms, doctor’s offices and other “service businesses” that earn over $250,000 wouldn’t be eligible to benefit from the new pass-through rules.

To Lattimer, advising clients is difficult because the new tax rules haven’t been finalized, and are more complex.

He also disagrees with GOP leaders that the tax overhaul will make filing your taxes much easier, so much so, says House Speaker Paul Ryan, R-Wis., that individuals “could file them on a postcard.”

“Everything they are putting through has made things more complicated,” Lattimer said.

John Evanich, a retired CPA from Wallingford who teaches tax courses at CPA firms and state CPA societies across the nation, also said it’s difficult to advise businesses who are trying to do year-end tax planning.

“We tell them to do the planning based on the tax laws of today,” he said. “When we see what’s in the final bill, then we can run some numbers.”

Surprise in next year’s paychecks

Both House and Senate bills would raise the standard deduction for individual filers from $6,350 to $12,000 and for married couples from $12,700 to $24,000, and many who itemize might find it more beneficial to take the standard deduction.

About 41 percent of Connecticut’s tax filers itemized deductions in 2015. Several analysts say that could drop dramatically when the final tax bill is implemented in 2018.

Evanich said the loss of the personal exemption, currently $4,050 for each family member, will reduce the impact of a higher standard deduction, especially for large families.

“Everybody is not going to gain for sure,” Evanich said. “Unfortunately there are going to be more losers than winners.”

As the House and Senate reconcile their differing bills, there could be some changes that benefit individual taxpayers.

California Republicans are pressing for a change that would allow taxpayers to take a deduction of up to  $10,000 for either property taxes paid or state taxes paid.

Others are pressing for an end to the House bill’s $500,000 cap on the deductibility of new mortgages, and its elimination of the deductibility of the mortgage on a second home.

But any changes favorable to individual taxpayers would probably have to be paid for by shrinking benefits for corporations.

Over the weekend, President Donald Trump broached the possibility of a 22 percent corporate rate. Each percentage point the corporate rate increases is worth about $100 billion over a decade.

But Trump’s willingness to cut corporate rates less was not enthusiastically received by GOP negotiators of a final tax bill.

Meanwhile, many working taxpayers in Connecticut could see reduced paychecks next year.

Stewart said the Internal Revenue Service isn’t likely to have new withholding tables for 2018 ready for awhile after the new tax bill goes into effect.

That means there may be a big “catch up” in withholding from the paychecks of those whose taxes will increase next year, as well as smaller paychecks after that, Stewart said.

“There’s no doubt in my mind that when the final bill passes, some people will be taking a big hit,” Stewart said.

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Ana Radelat Ana has written about politics and policy in Washington, D.C.. for Gannett, Thompson Reuters and UPI. She was a special correspondent for the Miami Herald, and a regular contributor to The New York TImes, Advertising Age and several other publications. She has also worked in broadcast journalism, for CNN and several local NPR stations. She is a graduate of the University of Maryland School of Journalism.

SEE WHAT READERS SAID

RELATED STORIES
CT hasn’t started collecting new payroll tax from state workers
by Keith M. Phaneuf

Connecticut established a new payroll tax surcharge on Jan. 1 but still isn't deducting it from state workers' paychecks.

Lamont’s budget offers another round of tax amnesty
by Keith M. Phaneuf

Gov. Ned Lamont’s proposal waives penalties and caps interest at 3% over each of the next two fiscal years.

Final passage of ‘Crown Act’ comes on unanimous vote
by Mark Pazniokas

With a unanimous vote, Connecticut became the latest state to adopt legislation prohibiting discrimination based on hairstyles associated with race.

Senate sends data center incentives and town aid pledge bills to Lamont’s desk
by Keith M. Phaneuf

Senate endorsed an omnibus fiscal bill that lays the groundwork for a major boost in PILOT aid to many municipalities.

Senate confirms Miguel Cardona as U.S. Secretary of Education
by Adria Watson

Cardona was the youngest principal in the state of Connecticut.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion Fitness is part of Connecticut’s COVID solution
by David Humphrey

Based on what we now know about infection rates and transmission, it is more apparent than ever before that gyms, fitness centers, and the physical and mental health benefits of exercise are essential to help our state get through the months ahead.

Opinion Connecticut can’t afford state government-run health insurance
by Mike Licamele

As much as I support strengthening and improving healthcare, I do not believe SB 842 is the way to do that. Instead of trying to force Connecticut residents into a new, government-controlled healthcare system, lawmakers should focus on improving our existing one by building on what’s working and continuing to address lowering costs, not raising taxes

Opinion Disabled, marginalized, stalled and walled
by Doris Maldonado

As a bilingual health information specialist for PATH P2P Family Voices CT and National Family Voices Cultural Responsiveness Telehealth Team, I offer more than professional expertise as well as despair for the marginalized within marginalized communities. I am a Latina with disabilities, adoptive mother of 17-year-old twins with special needs and a thriving toddler.

Opinion The marijuana legalization debate must be based on facts
by Will Jones III

In response to my earlier piece on why Connecticut lawmakers should reject marijuana commercialization,  Brendan Ruberry wrote a rebuttal that, on its face seems scathing, but to be clear, the attempted rebuttal falls flat and well off the mark.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO