You probably heard the statement that the government wants individuals to be able to file their taxes on one single sheet of paper. Did that dream become a reality with the 2018 tax plan? A simplified process of filling on just one page may sound great, but the new tax plan is still complicated.
As a tax preparer, you need to get up to speed on the facts of new legislation that may help your clients save more on taxes this year and discover the many ways your services will be more valuable this coming tax season. You can increase your tax preparer salary this year if you identify your ideal customer and understand how the most important changes to the tax code will affect them.
Read on for our overview of the tax code changes that could affect your tax preparer salary.
1. The Standard Deduction is Nearly Doubled
The amount increased to $12,000 for single filers, $18,000 for heads of households and $24,000 for married couples that file jointly.
Fewer people are likely to be interested in itemizing this year unless the itemizations can surpass the new threshold. If itemization is an add-on service you provide, consider offering a consultation service to help clients determine if it is necessary.
While clients no longer need meticulous calculations by a tax professional in deductions, they still need your services. You can address deductions while educating them on other adjustments and credits.
2. State and Local Income Taxes, Sales Taxes, and Property Tax Deductions are Capped at $10,000 Annually
The Tax Cuts and Jobs Act (TCJA) now limits the the deduction to $10,000 and applies to state income taxes, local income taxes and property taxes combined.
These were fully deductible under the previous tax law and many taxpayers in areas with high property values, like San Francisco, will be very frustrated by this loss. This frustration may help increase leads as people will need a tax pro like you who can help them find other means of maximizing deductions.
Be the one to address your community and your market’s intersection with the tax bill changes in your advertising, emails, and conversations. Help localize the national changes by explaining how it directly impacts them, locally, and how you can help them save on their taxes in 2019.
3. Fewer Popular Deductions
Some of the most popular deductions, like interest on home equity loans, unreimbursed employee expenses and moving costs are no longer allowed.
This is a change for many homeowners who hoped to use the re-fi interest to pay for personal expenses like college or vacation. Taxpayers will be looking to your business for advice and help to navigate their next steps.
The devil is in the details. A higher standard deduction sounds like a home run to your tax clients until you show them the small ways that the new tax bill could actually raise their tax bill this year, without your help.
4. Lower Tax Rates and Changed Income Ranges
There are still 7 brackets, but the ranges have changed.
| The current brackets are: | The new brackets will be: |
| 10% | 10% |
| 15% | 12% |
| 25% | 22% |
| 28% | 24% |
| 33% | 32% |
| 35% | 35% |
| 39.6% | 37% |
Lower rates make clients happy! Be the one to break the news to them first to help keep your business top of mind before the tax season begins. This will position you a knowledgeable, trusted resource and help clients remember to seek out your services this year.
Just because folks have lower income tax ranges for federal taxes doesn’t mean their local and state taxes will be lighter. Advertise your expertise on federal and local tax laws so clients know you’re on top of things and ready to help them keep taxes low this season.
5. Eliminated Personal and Dependent Exemptions
The new tax bill eliminates personal and dependent exemptions, which were $4,050 for 2017 and increased to $4,150 in 2018.
Notify clients and settle their worries! The doubling of the personal deduction along with the large increase in the Child Tax Credit will make up for this loss.
Your business is there to relieve the burden of filing taxes each and every year. Reach out with a personal email or phone call to the conversation going with clients to discuss new changes and how you have a plan to help them.
6. Enhanced Child Tax Credit
The child tax credit doubled to $2,000 per child with a refundable amount growing from $1,100 to $1,400.
Use your expertise to remind clients with children that this change is a trade-off. They are losing the personal exemption, but receive a bigger child tax credit and standard deduction. They will appreciate your knowledge and will be more likely to spread the word about your services.
Use your expertise to show clients with families that there is an important opportunity to lower their taxes this year–no matter their income level.
7. Eliminated Health Insurance Penalty
The tax penalty for not having health insurance will be gone after December 31, 2018.
Share the details of this change with clients to help them save the most money. Out of pocket medical expenses that are more than 7.5% of an individual's adjusted gross income can now be deducted.
Clients may be overpaying for an insurance plan for fear of being penalized. Relieve their worries by explaining the new law and help them itemize deductions and decrease the tax burden.
8. News Uses for 529 Savings Plans
Individuals who have a 529 plan can now put the funds toward private school or tutoring for a child in grade kindergarten through 12th grade.
This change is a boon to clients who set aside money and need to withdraw it early for other educational expenses tax-free.
People who have not noticed this part of the tax law will be impressed by your knowledge. Show how your services can help parents with school-aged kids save by referencing the new laws in your tax preparer business marketing. This can improve your tax preparer salary by attracting new clients.
9. Major Changes for Small Business
Small businesses can expense up to $1,000,000, and the corporate alternative minimum tax (AMT) has been eliminated.
Now is the time to offer tax services specifically for small businesses to help owners navigate the myriad of changes in tax code. This has the potential to bring you dozens of new clients and increase your tax preparer salary.
Small business owners are already balancing dozens of duties and want to work with a tax preparer who is knowledgeable about how the new tax law will help them save. Show clients how you are already two steps ahead and offer services to reduce taxes for small business.
10. Things Stay Simple for Average Tax Payers
More individuals will opt for the standard deduction and anyone with one employer should have a faster time filing.
Simplified tax preparation means you will have more time to take on additional clients this tax season. Review last year’s client list to identify clients who were easy to file for. This number can help you predict how many new clients you can take on.
Many of the changes to the 2018 tax code present an opportunity to increase leads, please existing clients and increase how much money you make as a tax preparer. As tax season begins, take advantage of additional opportunities to reach out to clients with new information and insight that will keep your business top of mind this year.
