Crack and Pack
In this episode, John fills us in on the most recent updates from the IRS on the technique referred to as “crack and pack.” The IRS has vowed to come after it!
John’s strength is his ability and commitment to improve the level and quality of the financial planning process.
His dedication to his clients’ growth involves an evolving strategy. His focus is to meet the demands, desires, and needs of his clients in a changing economic environment.
Don’t miss John’s explanation of “crack & pack” and the TCJA deductions:
- The 20% tax break for pass-through businesses in the new Tax Cuts and Jobs Act has a ceiling for qualified business income (QBI).
- Many small business owners have been looking for ways to get around this QBI limit. One way might be to break up their business into smaller entities:
- Small businesses in service industries like healthcare, financial planning, insurance, etc., try to separate the admin part of their business from the service part.
- For those small business owners who are married filing jointly, if their income goes above $315k, they lose the 20% deduction for their pass-through service business.
- The impact of the tax break is pretty big. If a business owner is making a salary of $200,000 and they’ve got $600,000 of qualified business income, 20% of that QBI number could be deductible. With $120,000 deductible, they pay tax on $480k rather than $600k (plus the salary).
This explains why people have been contemplating pulling their businesses apart! So what to do?
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