Section 199A Implementation and IRS Examination Issues: Critical QBI Issues for Individual and Business Taxpayers

Recording of a 90-minute premium CLE/CPE webinar with Q&A


Conducted on Tuesday, February 11, 2020

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Program Materials

This CLE/CPE webinar will guide tax professionals on critical issues in the implementation of Section 199A qualified business income (QBI) deductions and essential items of focus for an IRS examination and audit. The panel will discuss what to expect when the IRS begins auditing tax returns claiming the QBI deduction, identifying potential pitfalls and methods to avoid them, recent IRS guidance on real estate investments, and critical QBI issues for taxpayers involved in a "specified service trade or business" under Section 199A.

Description

Section 199A can be a gold mine for owners of pass-through entities and sole proprietors under current tax law. It allows a qualified taxpayer to deduct up to 20% of its QBI.

Final regulations for Section 199A and additional IRS guidance has set the stage and taxpayers filing returns claiming the QBI deduction is in full swing. To claim the 20% deduction, a taxpayer must be legitimately engaged in a trade or business and must demonstrate that he or she is regularly and continuously involved in the business activity, with the primary purpose of making a profit.

For taxpayers with income above the limits, the 20% deduction is limited to the greater of 50% of W-2 wages from the qualified trade or business or 25% of W-2 wages plus 2.5% of the basis of qualifying property. The aggregation of multiple trades or business is allowed under specific criteria, and taxpayers can combine W-2 wages and qualifying property to arrive at a more significant deduction.

For taxpayers providing services in a "specified service trade or business," the QBI deduction may not be available. This includes a trade or business where the principal asset is the "reputation or skill" of its employees or owners, such as law, accounting, performing arts, athletics, investing and investment management, and other specified areas.

Tax professionals must recognize the numerous pitfalls stemming from these complex tax rules to effectively guard against or handle an IRS examination and audit focused on the QBI deduction.

Listen as our panel discusses what to expect when the IRS begins auditing tax returns claiming the QBI deduction, the potential pitfalls and methods to avoid them, and crucial QBI issues for taxpayers involved in a "specified service trade or business" under Section 199A.

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Outline

  1. Section 199A and recent IRS guidance
  2. Tax issues and potential pitfalls that arise in claiming the QBI deduction
    1. Determining taxpayer qualification
    2. Income limitations
    3. Understanding the "specified service trade or business" standard
  3. Entity planning strategies
  4. IRS examination and audit areas of focus

Benefits

The panel will review these and other key issues:

  • Recent regulations and IRS guidance for claiming the QBI deduction
  • Key issues that arise for certain taxpayers and methods to overcome them
  • The "specified service trade or business" standard and planning options for taxpayers
  • What to expect when the IRS begins auditing tax returns claiming the QBI deduction

Faculty

Stein, Michel
Michel R. Stein

Principal
Hochman Salkin Toscher Perez

Mr. Stein specializes in tax controversies, as well as tax planning for individuals, businesses and corporations. For...  |  Read More

Toscher, Steven
Steven Toscher

Principal
Hochman Salkin Toscher Perez

Mr. Toscher has been representing clients for more than 35 years before the Internal Revenue Service, the Tax Divisions...  |  Read More

Stigile, Cory
Cory Stigile

Principal
Hochman Salkin Toscher Perez

Mr. Stigile specializes in tax controversies as well as tax, business, and international tax. His representation...  |  Read More

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