Lynn Nichols has been explaining federal tax law to audiences since 1969. He now brings an exclusive series of courses on Tax Reform to South Carolina this January in response to questions that stem from the Tax Cuts and Jobs Act that went into effect in December.
“I make complex provisions in the tax law understandable,” Nichols told SCACPA. “I can explain a complex tax provision so that practitioners understand it — and so they can apply it.”
Here are some things we learned from Nichols between his talks at our Cayce offices:
1. What point of view do you bring when you prepare your courses?
“I seem to have a gift for explaining complex topics, and that’s what has set me apart from others.
“I’m not nearly as clever with the jokes as some. I haven’t published learned treatises in the journals, but I can explain how the tax law works. I can explain why the tax court judges decided a case the way they decided it.
“I can bring complex facts into simple applications to the average CPA. And that’s not easy! “CPAs are not easy to teach because they often have preconceived notions. Sometimes they don’t want to learn a concept, they want to learn the mechanics. They want a cookbook. They want A-B-C, and I’m more inclined to say, ‘This is how we think about this.’”
2. What is the biggest difference between the Tax Cuts and Jobs Act and previous changes to legislation?
“The 1986 act really made some fundamental technical changes in the calculation of taxable income. The Alternative Minimum Tax, the Uniform Capitalization Rule, the Passive Activity Loss Limitation. Those were new ideas. This bill doesn’t do that. The only new idea is this concept of how much pass-through income is the owner’s personal service income equivalent to wages and how much is entity-level income.
“In this bill, the significant changes are not that complex. You’re going to give corporations an opportunity to bring money back home from overseas, you’re dropping the corporate tax rate, but there’s no complexity in that. You’re not changing the rules on calculation of corporate income.
“The ’86 act changed the rules on the calculation of taxable income. This new act is easier to explain and understand. But it has a more profound effect on the amount of tax a typical individual taxpayer is going to pay.”
3. How long will take the IRS to address the new legislation?
“Typically, the IRS begins by addressing those portions of a new law that cause the most difficulty in compliance. That is certainly true here. The first guidance was withholding tables for reduced individual tax rates. I expect the next guidance will be for changes to Cost Recovery rules and the Qualified Business Income deduction. Calculations of income affected by other changes will be necessary before we prepare 2018 tax returns, but the IRS will not be in a hurry to issue all that guidance.”
“Remember, more tax law has been made by the Internal Revenue Service and the federal courts than was ever made by Congress.”
4. What is the biggest misconception held by people who need advice from CPAs?
“Contrary to some politicians and media commentators, everyone benefits from this bill. Individuals have lower tax rates. Corporations have lower tax rates. Shareholders of corporations benefit from enhanced earnings. Individuals with relativity modest income benefit from the child tax credit, from enhanced standard deduction and other simplification.
“I expect all the individual cuts will be renewed by Congress in an ‘extenders bill’ before they expire.”
5. How can SCACPA members who take you courses find you for follow-up information?”
“I’m looking forward to working with the South Carolina Association of CPAs to develop weekly podcasts, online training that is specific to a technical topic, conference presentations and training archives that are easy to access and understand.
“When you leave these classes, you’re going to know how the tax law works.”