Republicans in Congress celebrated the passage of the biggest rewrite of the U.S. tax code in decades Wednesday, with President Donald Trump calling it a “Christmas gift for hard-working Americans.” Workers will see the first glimpse of a tax cut in February at the earliest, but it won’t be until 2019 — when people file their taxes for next year — that most will know whether they will pay more or less to the federal government.
In the meantime, tax attorneys, accountants and corporate payroll departments are scrambling to adjust to changes that won’t be official until Trump signs the bill in January.
Senate passes $1.5T tax bill; House to vote againAfter parliamentary problems were found, the Senate approved the measure early Wednesday morning. The House will have to vote again later Wednesday.
Homeowners are already peppering local officials with questions about whether they can — and should — prepay their 2018 property taxes in the less than a dozen days left in 2017, before new limits on such deductions take effect. Others are asking their accountants whether there are expenses — such as moving costs — that they should pay now before they are no longer eligible for preferential tax treatment.
Much of the confusion is the result of how quickly Republican lawmakers were able to pass the legislation.
“I have been a tax attorney over 40 years. I have seen plenty of tax bills. This is unprecedented,” said Robert Willens, a New York-based tax consultant.
Steven Rosenthal, a senior fellow at the nonpartisan Tax Policy Center, was just one year out of law school in 1986 when Congress last passed a significant revision of the tax code. He, and hundreds of other tax attorneys, spent years watching that process unfold, Rosenthal recalled.
This time, “there hasn’t been the deliberate and slow unfolding [of the legislation] like there was in ’86,” he said. “The whole process has been so opaque and so rushed that few people understand what has been going on.”
The new tax legislation, which delivers deep and permanent tax cuts to corporations and temporary relief to individuals, was hammered out by Republicans in a matter of months, delivering Trump his first major legislative victory on an issue many expected would not be resolved until 2018, if at all.
It is a double-edged sword for some business owners. Griff Paper and Film, a 100-person distributor in Philadelphia, plans to take advantage of the favorable tax treatment the law provides for “pass-through” corporations and use the savings to buy new equipment, hire more employees, and train the company’s interns to become long-term workers.
But the slow rollout is proving problematic. The Internal Revenue Service has yet to issue guidance on how the company should handle its payroll, for instance.
With little more than a week left in 2017, some individuals are racing to decide whether to take advantage of the changes before the IRS has even finalized the details. The new tax legislation, for instance, would cap deductions for state, local and property taxes at $10,000, prompting a Montgomery County lawmaker to urge the county to help residents prepay their property taxes before the end of the year.
Tax attorneys, meanwhile, said they have heard from clients who plan to accelerate charitable contributions this year because they might not need the deduction next year to lower their tax bill. Others are pondering whether to delay receiving income until 2018, when it could potentially be taxed at a lower rate.
For many people, the law renders obsolete the calculations companies use to withhold taxes from their paychecks, potentially leading some workers to not set aside enough for federal taxes and face a penalty. The American Payroll Association is warning of a potential “disaster” as companies wait to update their computer systems to reflect the changes.
Tax bill: 6 winners, 6 losers on Long IslandReal estate values are predicted to drop 10 percent and possibly more because of a $10,000 cap on deductions for property, sales and income taxes.