In 2018, we were inundated with information about tax reform and speculation of its potential impact. Well, we’ve come out the other side of tax season, and I was curious, did the outcome live up to the hype? Did Wymer Brownlee Wealth Strategies clients fare better or worse? After the April 15 deadline, I interviewed our Enid and Fairview tax directors to summarize their observations. Here’s what they had to say:
Christine Golden, director of marketing: If you had to summarize the impact of tax reform on our clients, was it generally good or bad?
Erica Shaloy, tax director (Fairview): Overall, reform was favorable for most young families and small business owners. Many clients previously didn’t qualify for the child tax credit due to their higher incomes, but this year they were able to benefit from the $2,000 per child credit.
Crystal Harmon, tax director (Enid): I agree. Small business owners were positively impacted by being able to take the 20 percent business deduction.
CG: Does that mean most people saw higher refunds?
CH: No, not necessarily. Although tax rates were down, refund amounts also depend on whether their withholdings changed. This is why, for many clients, tax reform didn’t live up to their expectations or they don’t feel generally positive about it.
ES: Crystal’s right. It’s always tough to explain smaller refunds. However, if 2017 rates were still in place with clients’ 2018 income, they would have owed a lot more. Once we talk through that and really compare apples to apples, most people understand that reform worked in their favor.
CG: So, were there any groups that reform didn’t positively affect?
CH: Losing itemized deductions for large employee business expenses hurt a number of people. For many of our high-income clients, capping the deductibility of real estate and state income taxes at $10,000 had a negative impact on their returns.
CG: With this transitional tax season behind us, is everything back to business-as-usual?
ES: We still recommend clients get tax projections for next year, especially if they own a business. While most of tax reform’s impact was felt this year, there can be residual effects in the future. Also, tax planning – rather than simple preparation – is critical for business owners because there are new opportunities to capitalize on if implemented before Dec. 31.
CH: There was so much change to process in a single tax season. We asked a lot of our team, but they really did a great job. Everyone worked hard to understand the new laws and get returns out the door as quickly as possible. The bottom line is that tax reform affected every single client in some way, and we’re grateful for their patience. Although the bulk of the transition is behind us, it’s not over just yet.
Category: Leaders, Tax and Accounting Team