On April 26, the Donald Trump Administration released a tax reform plan that will eventually be proposed to the House and Senate. The one-page document, “2017 Tax Reform for Economic Growth and American Jobs,” includes several key changes that will affect individual and business taxpayers. This reform will also affect tax professionals since they will likely have to aid their clients in understanding these changes.
Key Points of the Tax Reform Plan
Here are the key points listed in the administration’s tax reform plan:
- Repeal AMT (Alternative Minimum Tax)
- Reduce 7 tax brackets to 3 (10%, 25%, 35%)
- Eliminate inheritance/estate tax—this may also possibly mean the repeal of gift tax, but that has not been specifically stated in the plan yet.
- Reduce corporate tax rates from 35% to 15%—the rates for partnerships and LLCs would be drastically reduced.
- Eliminate the 3.8% Obamacare tax on investment income
- Double the standard deduction—this is aimed to incentivize taxpayers not to itemize their returns.
As a tax professional, you will need to be aware of these changes as the plan develops and goes into effect. The Trump Administration is still developing the reform plan so there is no indication as to when this plan will take effect. You will need to be ready to explain to your clients the changes and how it will personally affect them and their tax returns. This may also require a change in the tax planning for many clients.
How the Tax Reform Plan May Result in Loss of Clients
Many of these changes are intended to simplify taxes, which may result in a loss of clientele for tax professionals. Repealing the AMT and doubling the standard deduction would simplify tax returns for many taxpayers and may incentivize them to opt to self prepare their returns. Furthermore, the repeal of estate tax will likely result in a loss of clients for tax attorneys and tax preparers. The inheritance tax was a complicated addition to many taxpayers’ returns and often drove them to seek out the assistance of a tax professional. The elimination of this tax will likely result in those clients self preparing their tax returns.
Repealing the AMT and doubling the standard deduction would simplify tax returns for many taxpayers and may incentivize them to opt to self prepare their returns.
How to Use the Tax Reform Plan to Gain New Clients
While simplification may lead to a loss of clients, these changes will also bring about many questions and quite a bit of confusion for taxpayers affected by the legislation. So, you should aim to use this reform plan to your advantage as an opportunity to gain more clients. You should stay in-tune with changes as the plan develops and keep your clients informed on how these changes will affect them.
These changes will impact taxpayers at every income level, so the assistance tax professionals can provide should not be overlooked. Tax reform will result in a substantial amount of uncertainty for taxpayers, and you are your client’s guide through these changes.
These changes will impact taxpayers at every income level, so the assistance tax professionals can provide should not be overlooked.
Curious about where you can find more details on Trump's tax reform plan? Check out Trump's First 100 Days: A Tax Perspective.