Tax Reform Tips for Doctors and Lawyers

“Taxes – both for individuals and businesses – have changed dramatically and unlike anything ever before in our tax law,” said Steve Moskowitz, our Senior Partner, when addressing a local group of physicians recently.

The Tax Cuts and Jobs Act (TCJA) now in effect, creates a new deduction that lowers the tax rates on income from Partnerships, Limited Liability Companies, and S corporations. This lowers the effective tax rate on qualifying pass-through income from 37% to 29.6%!

As a seasoned tax attorney who practiced as a CPA for a “Big 8” (now “Big 4”) CPA firm before he became a tax attorney Steve Moskowitz, founded what would become Moskowitz LLP 30 years ago, offering clients a full suite of tax law from, for example, domestic to international tax law, criminal tax law, tax planning and tax preparation of current and delinquent fillings.

However, specific industries are severely limited from this tax break, including but not limited to, anyone performing services in the fields of health, law, accounting, consulting, and investment management.

Individuals and businesses in the service fields should review their tax situation now, in order to take advantage of the new IRC Section 199A.

Steve and Moskowitz LLP are dedicated to making sure people feel knowledgeable, confident and prepared to take advantage of the new tax law. For example, some strategies that we consider when advising our pass-through business clients:

1. Smooth taxable income by moving income and deductions between years. A taxpayer may miss out on the Sec. 199A deduction if a spike in taxable income pushes them over the threshold. Moving income and deductions between years may bring them below the income thresholds.

2. Incorporate Sole Proprietorships as a S-Corp. The Subchapter S election can convert some of the sole proprietor’s qualified business income into w-2 wages. If the sole proprietorship pays zero wages, the Sec. 199A deduction may equal zero. If the business instead elects for the sole proprietorship to be taxed as a Subchapter S corporation and breaks the profit into wages and qualified business income, there may be a Sec. 199A deduction.

3. Convert 1099 Contractors to Employees. If W-2 wages limit a taxpayer’s Sec. 199A deduction, creating more wages increases the 199A deduction. Employ family members like a spouse or child? Minor children of a sole proprietor or of a partnership can often be employed and escape both payroll taxes and income taxes on that income.

An accomplished tax attorney with three decades of experience under his belt, Steve knows what it means to dream big and work hard. Steve built his tax law practice from the ground up, holding tight to the vision of one day achieving the American Dream. Steve still believes in that dream, and he strives to uphold it for his clients. Having single-handedly grown his tax law firm to an impressive team of tax attorneys and accountants Steve understands firsthand the strength and endurance it takes to run a business. Now, his mission is to help other entrepreneurs and individuals avoid the dire pitfalls of poor tax planning and instead utilize the advantages the tax law provides.

Steve and his dedicated team are here to make sure people feel empowered, confident and prepared to take advantage of the new tax law.