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VOL 53; IRS RELEASES UPDATED GUIDANCE ON NEW PASS-THROUGH DEDUCTION

Posted by Admin Posted on Sept 12 2018
IRS RELEASES UPDATED GUIDANCE ON
NEW PASS -THROUGH DEDUCTION


Written by: Marci Gietl, CPA

Under the pass-through deduction implemented with Tax Cuts and Jobs Act (TCJA), eligible taxpayers could be entitled up to a 20% deduction of qualified business income (QBI). This article will address recent IRS guidance on this new deduction but please also refer to our previous article from January 2018 for more details.

The IRS has recently issued proposed regulations working to clarify components related to the pass through deduction. Part of the regulations clarify further what will or will not be considered as QBI in relation to gains and losses, reasonable compensation, guaranteed payments and other items. Additionally, if an individual or applicable pass-through entity conducts multiple trade or businesses directly, some items of QBI may be properly allocated across those multiple businesses. These proposed regs define that those items should be allocated in a reasonable manner that is consistently used from one tax year to the next; reasonable manner should be determined based on facts and circumstances.

The proposed regulations outline rules for how pass-through entities must provide the necessary information for their owners or beneficiaries to be able to determine QBI even though the pass through deduction isn’t claimed at the entity level.

Aggregation rules are included in the proposed regs as well. A taxpayer may, but are not required to, aggregate more than one trade or business and treat as a single trade or business for purposes of calculations related to the deduction if certain criteria are met. These criteria include, but are not limited to: more than 50% ownership in each aggregated business, none of the aggregated trade or businesses can be a specified service trade or business, and the aggregated businesses must meet two of three factors based on facts and circumstances.

The IRS has also issued Frequently Asked Questions (FAQs) in relation to the new deduction. These questions cover basic definitions and scenarios related to the new pass-through deduction so if you would like to further discuss how the pass through deduction may relate specifically to your tax planning, please contact us.

Health Care Reform Bills

In July, the House passed a number of bills aimed at health care reform but which would also have tax impacts. Many of the bills involve the use of Health Savings Accounts (HSA) or affect individuals with HSAs or Flexible Spending Accounts. Other bills are aimed at reforming taxes and credits implemented from the Affordable Care Act’s mandates for health care coverage. Continued monitoring of these developing bills is needed but they could provide great tax planning opportunities.

Please contact us if you would like to discuss further.

 
IMPORTANT TAX DATES TO REMEMBER


We want to remind you of important tax due dates and deadlines that are just around the corner.

Here is a recap of important dates to keep in mind as 2018 progresses:               

  • September 17, 2018 - 2018 3rd quarter estimate payment
  • September 17, 2018 - Form 1120-S and 1065, if extended
  • October 1, 2018 - Form 1041, if extended
  • October 15, 2018 - Form 1040 and 1120, if extended
  • January 15, 2019 - 2018 4th quarter estimate payment
     
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Becker and Rosen CPAs, LLC Disclaimer

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions. 

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