Financial advisors who hope to take advantage of the 20% tax deduction on pass-through business or save some money for their clients who operate as pass-throughs may be in for a rude surprise. While those who pay quarterly taxes must already make their first payment under the new tax regime this April, the Internal Revenue Service has yet to provide details on how the tax is estimated, Reuters writes.
It’s still unclear who exactly qualifies for the pass-through deduction, how much can be claimed and how it all fits in the 1040 form for 2018, according to the newswire. For anyone earning over $157,000 as an individual or $315,000 as a married couple, the tax break gets phased out, “which gets complicated quickly,” Reuters writes.
What’s more, the deduction is supposed to be coming off the 1040 form against business income, and a worksheet is supposed to help taxpayers do the calculations — but more guidance is expected only by the summer, Gene Zaino, CEO of MBO Partners, which specializes in independent workers, tells Reuters.
The newswire suggests taxpayers must turn to their tax obligations from 2017 to determine the first quarterly tax payments for 2018. Paying the same this year as last should preclude underpayment penalties, according to Reuters. Lisa Greene-Lewis, a CPA and tax expert with TurboTax, tells the newswire that taxpayers can also base quarterly payments on full-year income instead of fluctuating month-to-month income .
But other questions remain. For example, tax accountant and financial planner Phyllis Jo Kubey tells Reuters she’s still unsure how to treat clients who get income from outside the U.S., since the IRS hasn’t elaborated on what it means by the pass-through law applying to “domestic income.”