Small busi­ness tax de­duc­tion puz­zles CPAS

Antelope Valley Press (Sunday) - - Business - By JOYCE M. ROSEN­BERG

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.

As­so­ci­ated Press files

— 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.

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