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businesses Congress meant to include or exclude in its tax reform package. Specifi- cally, he had difficulty interpreting lan- guage in the original legislation excluding any pass-through company whose sales were based on the owners’ reputation. Losi also puzzled over how Congress defined “brokers.” “The question was how broad is that


[term] going to be interpreted,” Losi says. “Insurance brokers. Real estate brokers. Freight forwarders. Commodity brokers. Are they included in this [exclusion] or not? Fortunately, when the regulations came out [in August] they were not. The Treasury and the IRS took a very narrow interpretation. “As soon as I read that, I started


reaching out to our real estate brokers, our real estate developers, insurance brokers and I said, ‘Hey, you guys slipped through. You’re going to get the benefit of this deduction.’” While the first version of Section


199A answered many questions about tax deductions for pass-through compa- nies on their 2018 returns, a final version of the IRS rules would not be official


until they were published in the Federal Register in mid- to late-October (after this issue of Virginia Business went to press).


Nothing simplified As the final weeks of the 2018 tax


year tick away, tax professionals hope the owners of pass-through companies take the time to plan how best to file this year’s returns and budget for higher preparation costs because of the increased complexity of TCJA.


“There is nothing in Losi


that bill, the Tax Reform and Jobs Act, that simpli- fied our code, at all,” says Losi. “This year is going to be a nice big billing year for most CPA firms … We’re looking at a 3 to 5 percent


bump,” in both price and preparation hours. “With a W2 employee with not a lot


of deductions, there’s probably not a lot of additional time. But if you’re a business owner with one or more companies, that’s going to be a pretty big effort. Some will


qualify; some will not. And we’ve got to go through that analysis,” he says. Additional tax preparation time and


the charges for those services is “going to vary by client,” says Barbour of Brown Edwards. “But for people under $315,000


and $157,000, it will probably be pretty straightforward for them,” he says. “It’s going to be the ones over those limita- tions that we’ll spend more time talking about structuring and adjusting wages and different things like that to maximize the deduction to the extent we can. And maybe look at ways to restructure the business before year-end to maximize the deduction and more time doing the calculations. Especially when a company has multiple owners.” That sentiment was echoed by Mon-


falcone of Monfalcone & Garris. “Clients are probably expecting cost


cuts, but honestly with all this stuff that’s going on, I don’t know how that will hap- pen, unless we take a hit to cover their expectations of that,” she says. “But hon- estly, I think it’s going to take more time to make sure we’re doing the right thing.”


www.VirginiaBusiness.com


VIRGINIA BUSINESS


63


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