Regal Point Capital Management, LLC

Windermere Business Center 6735 Conroy Rd., Suite # 302 Orlando, FL 32835
  • Home
  • About Us
  • RPC Resources
    • RPC in the News
    • Learning Center
    • Vijay’s View Blog
    • RPC Research
    • RPC Events
  • Contact
  • Home
  • About Us
  • RPC Resources
    • RPC in the News
    • Learning Center
    • Vijay’s View Blog
    • RPC Research
    • RPC Events
  • Contact

IRS Targets Loopholes for $415 Billion Business Owner Tax Break

August 8, 2018 by Vijay Marolia

The Internal Revenue Service provided some long-awaited answers for business owners hoping to dodge the limits on a juicy new tax break.

The IRS’s proposed regulations make it clear that the agency considers a planning technique known as “crack and pack” to be abusive. The move had been eyed by professional service providers, such as law and accounting firms, to get around income limits set for pass-through businesses, whose income is reported on their owners’ personal returns.

Under that strategy, business owners split their businesses into different entities to lower their tax bills. For example, a law firm would put all the secretarial staff in one entity and the lawyers in another to get the full deduction for the income earned in the administrative entity.

The pass-through break under President Donald Trump’s tax law spurred tax professionals to circulate proposals and riff on each other’s ideas, as the industry looked to coalesce around strategies that would save their clients money.

Trump and Republican leaders have said middle-class Americans and small businesses would be the biggest beneficiaries under the $1.5 trillion tax cut. But the strategies under consideration to take advantage of the 20 percent pass-through deduction showed how top earners could ultimately reap the biggest gains.

Read more about the pass-through strategies accountants were considering

All taxpayers who earn less than $157,500, or $315,000 for a married couple, can now deduct 20 percent of the income they receive via pass-through businesses from their overall taxable income. If taxpayers earn above those amounts and aren’t service professionals, they must meet tests to take the full deduction — the size of their deduction depends on how much they pay in employee wages or how much they’ve invested in capital like real estate.

For “service professionals,” the break fully phases out if they earn more than $207,500 if they’re single, or $415,000 if they’re married.

Treasury officials said during a call with reporters on Wednesday that a law firm consisting of multiple, commonly-controlled entities, in which one entity provides its specified services back to the law firm, would be subject to the income limits on the services. The officials added that the proposed regulations also target relabeling employees as independent contractors.

The proposed regulations provide some answers about what’s a service business, but questions still remain since the law is vague and has left hundreds of thousands of businesses wondering if they qualify.

The IRS did specify that businesses with a relatively small amount of “specified” service income won’t be hit by the limits.

READ FULL ARTICLE

Source: Bloomberg.com
By Lynnley Browning
August 8, 2018

Filed Under: Learning Center

Categories

  • Learning Center
  • RPC Events
  • RPC in the News
  • RPC Research
  • Vijays View

Archives

  • September 2018
  • August 2018
  • May 2018
  • April 2018
  • April 2016
  • March 2016
  • February 2016
  • November 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • January 2014
  • December 2013
  • November 2013
  • September 2013
  • May 2013

Tags

Bill Ackman Bloomberg Brain Central Banking Charlie Munger City of Orlando Historic Preservation Board Darden Economy Fannie Mae Federal Reserve Finance Basics FNMA Freddie Mac GM Gold GORO Greece GSE Herbalife HLF Interest Rates LL Long Investment Ideas Lumber Liquidators MarketWatch Mining Weekly Money Managers NQ NQ Mobile Obamacare Open Letter Orlando Precious Metals Quick & Easy Real Clear Markets Regal Point Capital Seeking Alpha Short Investment Ideas Smith & Wesson Success SWHC TED Talks ValueWalk Wall Street Journal Warren Buffet

Copyright © 2018 Regal Point Capital Management LLC. All rights reserved.
This is not a solicitation to invest.