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Calculating Wages for W-2 Limitations Under Section 199A: New IRS Guidance on Permitted Methods

Rev. Proc. 2019-11 Unmodified Box Method, Modified Box 1 Method, Tracking Changes Method, Allocation Challenges

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, November 6, 2019

Recorded event now available

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This course will provide tax advisers to pass-through entities with a deep and practical guide to determining eligible W-2 wages for purposes of calculating the Section 199A deduction limitations. The panel will go beyond the basics to detail the Service's position in Revenue Procedure 2019-11 on allowable methods of calculating W-2 wages and will discuss regulations relating to allocating wages across multiple activities. The webinar will also discuss the phase-in of the wage limitations and describe the interrelation between wage and property limitation for purposes of calculating the 199A deduction.


A critical component of the Section 199A QBI regime is determining whether a pass-through entity has paid sufficient W-2 wages to qualify for the 20% deduction. In April 2019, the IRS issued Rev. Proc. 2019-11 to provide methods for calculating W-2 wages for purposes of Section 199A. However, complexity remains as to allocating wages to an entity’s trades or businesses, particularly in instances where a pass-through entity has multiple lines of business.

Section 199A requires pass-through owners to reduce their QBI deduction for a trade or business based on W-2 wage limitations. The provision links W-2 wages for Section 199A calculation purposes to the definitions found in Sections 6051(a)(3) (amounts paid for services by an employer to an employee) and 6051(a)(8) (elective deferrals and deferred compensation).

Tax advisers must know not only how to use the wage calculation methods permitted by the Rev. Proc., but also how to allocate the wages to QBI.

Listen as our expert panel goes beyond the basics to offer practical guidance on the permissible methods of calculating and allocating W-2 wages for Section 199A QBI purposes.



  1. Section 199A W-2 wages and property limitations
  2. Rev. Proc. 2019-11 permissible methods
    1. Unmodified box 1 method
    2. Modified box 1 method
    3. Tracking changes method
    4. Cross-reference to Section 6051 wages definitions
  3. Allocating W-2 wages to QBI activities
  4. Aggregation questions
  5. Definition of W-2 wages for QBI calculations and limits
  6. Allocating W-2 wages to PTE owners
  7. Impact of reasonable compensation requirements on QBI deduction calculations


Claybon, Alexa
Alexa Claybon

Principal | National Tax Department
Ernst & Young

Ms. Claybon is a Principal in the National Tax Department - Quantitative Services in Washington, D.C. She was formerly...  |  Read More

Mandarino, Joseph
Joseph C. Mandarino

Smith Gambrell & Russell

Mr. Mandarino's practice focuses on corporate, tax and finance law. He is involved with a wide variety of...  |  Read More

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