QBI Forms 8995 and 8995A: Interpreting Evolving Guidance on SSTBs and the 20 Percent Deduction

Description

Section 199A provides a 20 percent deduction for qualified business income (QBI). Form 8995, Qualified Business Income Simplified Calculation, and Form 8995A, Qualified Business Income, provide the IRS with details of the calculation of the 20 percent deduction under 199A.

The latter Form, 8995A, is six pages and includes four parts and four schedules that walk practitioners through the aggregation of business operations (Schedule B and Part 1), loss netting and carryforward (Schedule C), determining your QBI deduction (Part IV), calculating the phase-in reduction (Part III), and other calculations.

There are steps tax preparers can take to maximize the QBI deduction. These include aggregating businesses for QBI--this election is irrevocable and requires careful consideration. Real estate can qualify for the QBI deduction if it is part of a trade or business. There is a safe harbor to make this determination. Special de minimis rules allow businesses with less than $25 million in gross receipts to avoid the SSTB classification if less than 10 percent of their receipts are from personal services. Understanding how to maximize the 20 percent deduction is critical for practitioners working with businesses.

Listen as our expert panel explains completing Forms 8995 and 8995A, considerations for maximizing the 20 percent QBI deduction, and the latest developments under 199A.