Section 199A Qualified Business Income (Currently Unavailable)

Author: James R. Hamill

Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2025 to receive credits

Section 199A allows a 20% deduction for “qualified business income.” This deduction applies to any business income earned outside a C corporation, so it will affect schedule C filers, and income earned in a partnership or an S corporation. IRS regulatory guidance provides the most detailed rules for how this deduction will work for affected taxpayers. The mechanics of the deduction are not that difficult, but the deduction either phases out or may be limited if taxable income exceeds a threshold amount. For service businesses the deduction can be lost when income reaches the end of the phase-out range. For non-service businesses the deduction may be limited based on the W-2 wages paid from the business or a combination of W-2 wages and unadjusted basis of property used in the business. The Treasury Inspector General has advised IRS that many reported Section 199A deductions are not proper. The IG suggests that IRS lower the threshold to examine claimed deductions and issue warnings about the need to comply with the rules. Did the IRS clarify whether a business is a service business? This and more questions will be answered in this two-hour CPE course. Join Jim Hamill, CPA, Ph.D., for a look at how this deduction works and answers to your clients' questions about this money-saving opportunity for Schedule C filers and those in certain LLCs, S corps and partnerships. It may also be possible to plan to maximize the deduction when the taxpayer is otherwise in the phase-out range. This course will discuss those issues, and many others, to allow you to properly advise clients.

Publication Date: April 2022

Designed For
CPAs, EAs, tax preparers and other tax professionals with responsibility for advising clients with business income on their tax returns.

Topics Covered

• General Provisions
• Trade or Business Definition
• Rental as a Business
• Service Business Defined
• Aggregation Options
• W-2 and UBIA Allocations

Learning Objectives

• Recognize the Section 199A deduction for taxpayers above the threshold income level and for other taxpayers
• Identify planning opportunities to maximize the deduction
• Describe a service business as that term is used in Section 199A
• Identify and apply IRS guidance of August 8, 2018 when working with taxpayers on the QBID
• Recognize types of ineligible taxpayers
• Identify correct statements regarding qualified business income
• Differentiate statements with respect to aggregation
• Describe compensation for services or capital
• Recognize which type of interest income is included in qualified business income for purposes of the §199A deduction
• Differentiate aggregation/segregation
• Identify the threshold amount for QBID filers
• Recognize which service businesses cannot be segregated if there is greater than what percent common ownership
• Identify the percent of QBID claims reviewed by TIGTA that were below the threshold set by the IRS for review
• Identify the IRS form that is used to compute QBID for a taxpayer
• Identify the percent by which the QBID of the payee can be boosted with a change in classification

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic knowledge of passthrough entity taxation concepts.

Advance Preparation
None