New Tax Code Headed to President’s Desk; Here’s What You Need to Know
Congress is expected to pass a tax code overhaul this week, with President Donald Trump aiming to sign the bill not long after landing on his desk.
As you most certainly know, a comprehensive tax reform bill has been passed by both houses of Congress and is on its way to the president’s desk. I anticipate President Trump will sign it by the end of the year, perhaps before Christmas.
You may think the president’s signature is the end of the “lawmaking,” but it is only the beginning. The last time we had a major reform of the U.S. tax code the signing of the bill set off a regulatory and legislative chain of events that took years to complete.
This is what to expect in the coming weeks, months, and years:
After signing, the Congressional Joint Committee on Taxation will likely develop and issue a “committee report,” which will contain a general explanation of the final bill. This is mainly so that Congress and governmental agencies will gather insight into the predicted effects of the tax bill on revenue.
Meanwhile, the IRS will focus on adjusting the withholding tables and other payroll-related documents and instructions. The IRS generally makes these adjustments in December, but is delaying this process until January while it waits for tax reform discussions to conclude.
This will have an effect on your 2017 tax filing as, although the bill is generally applicable to tax years 2018 and later, there are a few items that have 2017 effective dates. Therefore, the IRS will still hold off on issuing tax forms to make certain that all of the 2017 tax forms take the bill into consideration.
We often have clients ask why we can’t prepare their tax returns in January. The answer is because all of the forms won’t be ready.
Expect ‘Technical Corrections’ to Tax Code
Once this process is complete, our friends at the IRS will develop a priority list of the guidance it will need to generate to implement a new act. The IRS has already started soliciting input and will ask for input from organizations such as the American Institute of Certified Public Accountants (AICPA). The IRS will then send out press releases, which will most probably be misinterpreted.
Fortunately they will also send out notices to practitioners like me and we can set things straight for our clients.
It’s not uncommon for unintended technical glitches to come to light after the final bill is passed. Congress will likely have to pass legislation called “technical corrections” to fix these issues. With such a large bill, this process could take more than a year.
The text of the bill contains “grants of authority” to the Treasury Department to issue regulations explaining how aspects of the law should be implemented. These regulations are often issued in proposed and temporary format which allows public comment, but sometimes they are simply implemented without any input whatsoever.
I would like to point out that a wall in my office lobby is covered with tax code and interpretation. The actual tax code fits into four volumes — the interpretation (revenue rulings, treasury bulletins and case law) — take up the rest of the 20-foot wall. While the bill is long at around 250 pages, I expect to need a much longer wall to hold all of the interpretation.
Also, court cases will start to pop up in which taxpayers believe the new regulations and interpretations don’t comport with the law or in which the IRS believes taxpayers’ interpretations of the law are wrong. These types of cases could take years to resolve.
Keep in touch with your tax professional and be sure they are up to date on the sweeping changes to the tax code. Things will be radically different in 2018, and there is some planning to do before the end of 2017. Make certain that you maximize your benefits and minimize your liability.
Mitch Reitman, a SSI Hall of Fame inductee, is the Managing Principal at Reitman Consulting Group. He can be reached at (817) 698-9999.
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