Tax reform

[Pacun]

Most of my clients make less than $50k for Single and less than $80k for MFJ. Their houses are less than $350K and their Real Estate taxes are well below 5K. Most of my people will have only benefits from the new law, correct? AND that's without considering that the tax brackets have a lower tax rate!!!!

I have some parents as clients with high school graduates 19-25 years old who don't go to school and don't work. Their actions piss me off a little bit because some of the parents are old, don't speak English and are cleaning offices and houses and they have two jobs while their children speak English, are young and are enjoying life at home. So, these alcahuete parents will not longer benefit when claiming these children. These parents will no longer benefit when claiming them on their Federal Return but they will still claim them for the state exemptions and other benefits that depend on the size of the family. So I will... we will have to be careful if we decide not to claim those children on their returns even if tax benefit is 0.

Another situation that should be consider if when people will be filing affidavit of support for immigration. A lot of people don't pass the 125% poverty level because they claim a lot of dependents, so if the dependents will only benefit them on their state return, it might make sense not to claim them.

Is it safe to say that if someone makes only 20K, the new law will only benefit them?

[Abby Normal]

Standard deduction people benefit. Itemizers who had near 24k in deductions will lose their personal exemptions but have slightly lower rates. returns with dependents under 17 will get increased child tax credit, and there's a small family credit for kids over 16 that I haven't bothered to learn yet.

A single at 20k with no dependents, their tax rate will remain 10%, but they have a slightly higher deduction of 12,000 vs 10,350, so save $165.

[SaraEA]

Pacun, it seems like most of your clients will no longer itemize after 2017 so you better start looking for new clients.  I think this coming tax season will be extremely busy because people will have heard so much about tax reform they'll be confused, even if most changes won't affect their 2017 filing.  Next tax season should also be super busy because even if folks try DIY they won't believe the results and will seek professional help.  Once they get that they won't be itemizing, business should drop off for former Sch A clients.  This prediction of course hinges on how IRS defines children and certain non-children now that we have no more exemptions.  Will we still have dependents?  (Category useful only for claiming certain credits, etc.)  For all of us February should be insane when people start getting their paychecks with the new withholding amounts and want to know if enough is being withheld.  I am already dreading the phone calls, knowing by then I'll be buried in tax returns.

[Pacun]

As someone said in the past on this forum, we only have 6 percent of the population as clients and they are not the brightest 6 percent. That fact will not change. Even postcard filing will be a challenge for that 6 percent. BUT you are right, some preparers who do a lot of schedule As should reconsider their business plans for future years.  The few Sch As I prepared are for people who pay a lot on Mortgage interest and they might still continue to file sch A even "for a few more dollars" in tax savings.

 

[Catherine]

There will still be plenty of people who are too busy or who detest the job enough that they want it done for them.  However, if there are fewer clients with Sch A, I can give them a lower price and spend more time teasing out the stock options and bitcoin type transactions.