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What. A. Year.

When tax geeks arose from their slumber on January 1st, we were greeted by a strange and unfamiliar world. Gone were personal exemptions, Section 199, and 50% bonus depreciation. In their place were a doubled standard deduction, Section 199A, and 100% bonus depreciation. These changes, in addition to countless others, were the end result of a whirlwind legislative process that overhauled our beloved Internal Revenue Code in a mere seven weeks, an act of Congressional hubris that tax professionals will rue for years to come.

As a result of this sweeping new legislation, ever since the calendar turned to 2018, all of our attention has been focused on getting up to speed on the new law. But while we’ve been up to the strained waistline of our pleated Dockers in Opportunity Zones and interest limitations, the century worth of tax law that existed prior to the Tax Cuts and Jobs Act has been completely ignored.

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Authored by Tony Nitti, Withum Partner and writer for Forbes.com. 

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If someone asked you to handpick one provision from the recently enacted Tax Cuts and Jobs Act that perfectly embodies the many shortcomings of this most recent round of tax reform, you could do far worse than settling on Section 1400Z-2, the “Opportunity Zone” incentive.

For starters, like the rest of the Act, Section 1400Z-2 was, by all appearances, drafted by a sleep-deprived eleven-year old. It causes confusion in the first sentence. It’s riddled with cross-references to incorrect paragraphs and critical but poorly-defined terms of art that often differ from one another by one word.  As a result, while this provision — like the Act as a whole — promises a bounty of tax cuts, only the brightest among us will be able to unlock its secrets.

Continue reading on, Forbes.com

Authored by Tony Nitti, Withum Partner and writer for Forbes.com. 

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The Tax Cuts and Jobs Act — signed into law on December 22, 2017 — gave birth to a brand new provision: Section 199A, which permits owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of the income earned by the business. While the provision has the potential to bestow a tremendous benefit upon owners of these pass-through businesses, since its enactment, no one has been able to, well… figure out how the whole thing works. Quite truthfully, the statutory language of Section 199A created more questions than answers, with those queries ranging from the seemingly simple — what do we do about a fiscal year business that crosses over January 1, 2018? — to the much more complex — what exactly is a “specified service business” for which a deduction is generally prohibited?

I’ve spent more than my fair share of time writing and teaching about Section 199A since it’s enactment, and have grown weary of repeating the familiar refrain of WE DON’T KNOW YET each time someone asked a perfectly reasonable question. But that has been the reality.

Until now.

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Authored by Tony Nitti, Withum Partner and writer for Forbes.com.

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If you were given the option of magically becoming 23 again — with the catch being that you had to be 23 in today’s world — would you do it? While having a hip that wasn’t slowly turning to dust would certainly be nice, I’d have to pass. The mere possibility that a combination of crippling student loan debt, rising housing prices, and diminishing starting salaries would force me to live with my parents for even one day beyond graduation makes my worsening limp seem not so bad.

Plus, I’m a tax guy. And I can’t imagine having to start my career in tax now. The entire Internal Revenue Code was rewritten as of January 1, 2018, which, in theory, kind of provides a “clean slate” to new professionals. No need to learn all that old stuff now that the new law is in town. But here’s the thing: all that old stuff is still really important, it’s just not there anymore. Making matters worse, the new law was hastily, and as we’re quickly discovering, poorly written, and as a result, trying to chase down answers in today’s Code is akin to being asked to solve the New York Times crossword puzzle, only after all the clues have been re-authored by sleep-deprived third graders.

Think I’m exaggerating? Stick with me.

Continue reading on, Forbes.com

Authored by Tony Nitti, Withum Partner and writer for Forbes.com.

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The Tax Cuts and Jobs Act — signed into law on December 22, 2017 — gave birth to a brand new provision: Section 199A, which permits owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of the income earned by the business. The motivation for the new deduction is clear: to allow these business owners to keep pace with the significant corporate tax cut offered by the Act.

Income earned by a C corporation is subject to double taxation; first at the entity level, and then a second time at the shareholder level when the corporation distributes its income as a dividend. As part of the Act, the entity-level tax imposed on C corporations was reduced from a top rate of 35% to a flat rate of 21%. While the Act retained the top rate on dividend income of 20%, the dramatic decrease in the corporate-level tax lowered the top combined federal rate on income earned by a C corporation from 48% to 36.8%.

Contrary to C corporations, income earned by a sole proprietorship, S corporation or partnership is subject to only a single level of tax. There is generally no tax at the entity level; instead, the owner of the business reports his or her share of the income of the business directly on his or her tax return, and pays the corresponding tax at ordinary rates.

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Authored by Tony Nitti, Withum Partner and writer for Forbes.com.

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People are fat. No, no….not you. You’ve never looked better. I was talking about everyone else.

Well, not everyone else, but the statistics are pretty bleak. Two out of every three Americans are considered overweight or obese, ranking the U.S. among the fattest countries in the world.

Of course, rampant obesity doesn’t just make for an unpleasant trip to Walmart, it also kills. Cronut-related medical conditions resulted in 120,000 deaths last year, and that was just at one Columbus, Ohio diner. Ok, I made that last part up. But you get the idea. It’s a real problem.

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Authored by Tony Nitti, Withum Partner and writer for Forbes.com.

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For the past decade I’ve lived in Colorado, home to 14,000 foot summits, the 2016 Super Bowl champions, and lots and lots of legal weed. Now, we can debate whether legalized medicinal and recreational marijuana is healthy for an individual, profitable for a government, or morally palatable to a society, but what is not up for debate is this: the widespread availability of legal weed has given rise to a marked increase in amusing anecdotes.

Case in point: last week my friend and I went out for what was intended to be a moderate mountain bike ride. As tends to happen, however, two hours quickly turned to three, and then four, and before we knew it, we had been pedaling for nearly five hours. This was problematic for two reasons: first, we had only brought enough food for half that duration, and second, my buddy was in danger of missing the start of his son’s baseball game.

At long last, we returned to the trailhead, where my famished friend, before even changing out of his bib shorts or mounting his bike upon its rack, began tearing through his car for any morsel of food. He quickly grew frustrated, because on this day he had borrowed his wife’s car, so his usual supply of energy bars was nowhere to be found.

Finally, he opened the center console, and pulled out a sandwich bag filled with chocolate squares. One…two…three were popped into his mouth and swallowed, and as he went back for round two, I saw his face change. For it was at that moment that he realized that these were not ordinary chocolates, but rather his wife’s supply of “emergency” edibles in the event she felt overly stressed at work.

Needless to say, that was the most fascinating Little League game he ever sat through. 

Continue reading on, Forbes.com

Authored by Tony Nitti, Withum Partner and writer for Forbes.com.

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