Republican lawmakers said they wanted to simplify the tax code so you could file your return on a postcard. It turns out the new tax law will be anything but simple for many affluent Americans, who are now inundating their accountants for advice. 

“They made it a lot more complex for a lot of people,” said Jody Padar, chief executive officer of New Vision CPA Group in Mt. Prospect, Illinois. 

Clients are already asking how to exploit the changes, according to certified public accountants, lawyers and financial advisors. In some cases, the best advice is clear. For others, especially business owners, tax experts are scrambling to understand the full implications of the 500-page law, which changes the rates on individuals and corporations, and eliminates or limits many popular deductions. 

As a result, the new law could change the financial consequences of major life decisions for millions of Americans, such as who you work for, whether you move or re-model your home, how you get to work, and even whether you get married or divorced. If you make a substantial amount of money, the right decisions could save thousands of dollars. 

President Donald Trump signed the bill into law Friday. That allows the Internal Revenue Service to begin writing regulations on exactly how the law’s more complicated provisions—notably the deduction for pass-through businesses—would be implemented. But many advisors are already starting to plan, and calculate options, for their clients.

Business Owners

Among the law’s most controversial and confusing provisions is a new 20 percent tax deduction for pass-through businesses, which are privately owned firms whose owners pay individual rates on the income they earn. That, along with a slashing of the corporate tax rate from 35 percent to 21 percent, is raising big questions about how to structure companies in 2018.

“I can’t believe this is going into effect in two weeks,” said K. Davis Senseman, founder of the Minneapolis-based Davis Law Office, who specializes in small businesses.

Senseman is in disbelief because a different corporate structure might make sense for each of her 800 clients, she said. And that means each of them needs to re-examine the situation fast. The earlier changes are made in 2018, the more potential for tax savings. 

But even the U.S.’s leading tax experts say they don’t yet fully understand the implications of the new rules to calculate which option is best for clients. An analysis by a dozen tax professors identified a number of potential loopholes created by the pass-through break, and by the lower rate on regular corporations known as “C-corps.”

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