female-doing-year-end-tax-planning
2021

Year-end tax planning

Year-end business tax planning webinar series

During our year-end business tax planning webinar series, specialists from our tax services practice discussed the latest regulations and the most common topics their clients are asking about.

The program addressed a variety of topics including business interest limitation provisions, transfer pricing, global intangible low-taxed income (GILTI), Paycheck Protection Program (PPP) loan updates, tax implications for remote employees, expiring tax provisions and pending legislative tax changes, among other key topics.

2021 year-end tax letter

Published on Oct. 13, 2021

History repeating?

As we write this year’s tax letter, we are reminded of our 2017 edition. While it is said history does not repeat itself, sometimes its events are awfully similar. In the fall of 2017, it was unclear whether the Tax Cuts and Jobs Act (TCJA) would be enacted. Provisions were being debated and there was no clear path to passage. The same can be said of 2021: The $3.5 trillion “human” infrastructure reconciliation package remains mired in debate between moderate and progressives within the Democratic Party. The bipartisan infrastructure bill is also ensnared in the same conflict, with the legislation’s future likely tied to the outcome of a successful budget reconciliation package negotiation. With little likelihood of Republican support, all but three Democratic votes will be needed in the House and all 50 Democratic senators will be needed for passage using the reconciliation process.

What does this mean for you?

At this time, it is difficult to say as the contents of the reconciliation bill are currently being fiercely debated. Whether the package’s top line is $1.5 trillion, $3.5 trillion or some amount in between, if Democrats are able to compromise and successfully pass a bill, it’s certain to include major tax changes. These changes could come in the form of a capital gains rate increase, corporate and individual rate increases, and modifications to the estate and gift tax. Based on the initial House Ways and Means Committee bill (see our previous tax alert), most of the provisions would not become effective until 2022, with the notable exception of capital gains (currently proposed for an effective date of Sept. 13, 2021). Consequently, we strongly recommend you monitor the progress of the ongoing negotiations carefully. Accelerating income into 2021 and deferring significant expenses until 2022 where practical may be the best planning strategy depending upon your tax bracket. With respect to capital gains, if a September effective date remains, the planning door may have closed; however, it is possible there will be a change in effective dates as negotiations progress, possibly to the date of enactment or even Jan. 1, 2022.

Our focus in this year’s letter is on the tax code modifications being considered, critical issues in healthcare and employee benefits, state and local tax trends as well as important reminders of expiring taxpayer-friendly provisions enacted via previous COVID-19 stimulus legislation.

Tax planning should be addressed throughout the year and be an integral part of financial planning. As always, we encourage you to contact your Baker Tilly advisor to discuss how these issues impact your tax position.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.