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Additional Guidance Needed Regarding the Qualified Business Income Deduction

The American Institute of CPAs (AICPA) has requested additional guidance on tax reform’s Internal Revenue Code (IRC) Section 199A Qualified Business Income (QBI) deduction.

199A Deduction Guidance

The IRS issued final and proposed regulations in February 2019 on the IRC Section 199A QBI deduction enacted in 2017 under the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97). Additionally, the IRS later issued Frequently Asked Questions (FAQs) on the computation of QBI and instructions to Form 8995, Qualified Business Income Deduction Simplified Computation, and Form 8995-A, Qualified Business Income Deduction.

However, the AICPA says taxpayers and practitioners need additional guidance. “We urge that you provide additional certainty regarding which deductions are not reductions for QBI,” the AICPA wrote in a letter addressed to David Kautter, Treasury’s assistant secretary for tax policy, and Michael J. Desmond, IRS chief counsel.

In brief, the AICPA recommends that the Treasury and the IRS confirm that the deductible portion of self-employment tax under IRC Section 164(f), the deduction for self-employed health insurance under IRC Section 162(l), and the deduction for contributions to qualified retirement plans under IRC Section 404 are not automatically reductions of QBI. Additionally, it recommends that the IRS update form instructions to reflect the same treatment for a charitable deduction under IRC Section 170.

199A Rules Under Review

Meanwhile, the White House’s Office of Information and Regulatory Affairs (OIRA) is currently reviewing IRC Section 199A rules as related to guidance on computations for shareholders of real estate investment trusts (REIT).

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