This year has brought changes in tax laws, which are resulting in higher taxes in many instances.
Estate planning and business succession attorney Andrew J. Knutson of Thompson Law and Adam Sweet, who leads Eide Bailly’s Passthrough Entity Consulting Group, will present their knowledge and insights of current tax law changes at a Nov. 17 webinar organized by the Prairie Family Business Association.
Together, they will explore the potential impact tax law changes are having and will have on individuals, families and businesses.
We got a preview from the presenters.
First, how significantly has tax law changed this year? What are some of the key areas businesses need to know?
Adam Sweet: There have been no major wholesale changes yet. Instead, there have been piecemeal changes dealing with the COVID pandemic and associated issues. But there is a chance significant tax legislation will be passed before year end.
Andrew Knutson: The bipartisan infrastructure bill that was passed did contain a few tax provisions, but they are relatively minor. The major changes on the horizon would be contained in the Build Back Better Act, also known as the $1.75 trillion reconciliation bill.
Family businesses often have unique tax needs. Are there any changes that particularly apply to them?
AS: Possible rate increases and modifications to the section 199A deduction could impact family-owned businesses. Both have been proposed, and we shall see what actually passes.
AK: Another proposal that would impact many small businesses would be the tax increase on “pass-through” businesses, like certain partnerships, LLCs and S corporations.
Looking ahead, do we anticipate any further changes that would apply to the 2022 calendar year? Are there elements businesses should be taking into account as they plan for expenses this year or next?
AK: Most experts are assuming that any major tax legislation will be enacted this year, 2021, if at all. This is primarily due to the 2022 midterm elections — legislation raising taxes during an election year is usually a detriment for the party in power. So we should have an idea of what changes are in store for 2022 by the end of this year. If the assumption is that new tax legislation will pass in some form, then business owners should look at the possibility of realizing more income this year and pushing more expenses into 2022. Also, if legislation does pass, business owners may want to look at restructuring their business form, for example an S corporation versus C corporation versus partnership tax structure.
What about for individuals? Are there any new considerations we all should be taking as we tax plan for this year and next?
AS: It appears the individual cap for state and local tax deductions could be raised — currently capped at $10,000. Also, the net investment income tax — a 3.8 percent surcharge — could apply to more taxpayers as compared to current law.
AK: Cryptocurrency trading and reporting could be changed.
The pandemic brought its own set of tax implications for businesses. Has that continued in 2021, and do we expect any pandemic-related tax issues for 2022?
AK: Not likely in 2022. Instead — unless there is a new major outbreak — we will continue to see pandemic-related assistance and favorable provisions start to phase out. For example, the COVID-19 emergency relief for federal student loans ends Jan. 31, 2022 — meaning that student loan payments will start again. Also, the Employee Retention Credit under the CARES Act will likely end Jan. 1, 2022.