Small business tax deduction puzzles CPAS
AP Business Writer
NEW YORK — Millions of small business owners will be in uncharted waters this tax season as they try to determine if they qualify for a deduction that could exempt onefifth of their income from taxes.
Five months after the IRS issued guidelines to help business owners and tax advisers understand how the complex deduction works, accountants and tax attorneys still have questions. Even those who have attended seminars and workshops about the new law have come away scratching their heads, especially about a section that bars service providers like doctors, lawyers and consultants from claiming the deduction. Some of these company owners have businesses that don’t easily fit into the IRS guidelines or proposed regulations the agency has also issued.
“There’s a lot of conflicting advice out there,” says Jeffrey Berdahl, a CPA with RLB Certified Public Accountants in Allentown, Pennsylvania. “It’s going to be like the Wild West.” the books, or pay extra to have their tax advisers do the work.
Owners who have more than one business with employees may be able to aggregate, or combine the qualified business income of the companies, and lower the impact of W2 wages on the deduction, says Miguel Farra, a CPA and tax attorney with MBAF in Miami. But the businesses must be in a related industry.
“If you are a real estate developer and somebody that owns real estate as investment property, you probably can aggregate,” Farra says. But someone who owns a cleaning service and an auto servicing shop wouldn’t be able to aggregate their income.
— Millions of small business owners and their tax advisers will be in uncharted waters as they tackle 2018 returns. A new deduction can exempt one-fifth of owners’ business income but is complex and confusing.