TIGTA Report – Sec. 199A
TIGTA Report – Sec. 199A – contains a report that addresses the IRS’s performance in connection with the implementation of the highly complex and broad-reaching Qualified Business Income Deduction for pass-thru entities.
The IRS took proactive steps to implement the Qualified Business Income Deduction including establishing an implementation team, creating an action plan, and developing a communication strategy. However, IRS management
indicated that due to the timing of the release of guidance, the IRS was unable to develop a tax form for the deduction. IRS management indicated that delaying the development of a tax form until Tax Year 2019 allowed the IRS to receive comments on the guidance, consider those comments before finalizing the guidance, and gain some experience with the first filing season. As an alternative, the IRS developed a worksheet to assist taxpayers with calculating the Qualified Business Income Deduction.
In addition, *************2*************************** **************************2**************************** **************************2**************************** **************************2**************************** *******2*******. IRS management responded that they would like to ensure an appropriate balance between compliance risk and taxpayer burden. **************************2**************************** **************************2**************************** *******2******, management plans to develop a post-processing compliance plan. Near the conclusion of our fieldwork, the IRS prepared a computer programming request to identify and/or reject tax returns when the Qualified Business Income Deduction exceeds the 20 percent taxable income limitation.
The report itself continues
The Tax Cuts and Jobs Act,1 signed into law on December 22, 2017, includes Provision 11011 which creates a new Internal Revenue Code Section 199A, i.e., Qualified Business Income Deduction. This provision provides individuals with a new tax deduction for qualified business income. On March 23, 2018, the President also signed into law the Consolidated Appropriations Act of 20182 which requires patrons of specified cooperatives3 to reduce their Qualified Business Income Deduction when receiving certain income from the specified cooperatives. Section 199A provides a deduction for taxable years beginning after December 31, 2017, of up to 20 percent of an individual’s domestic qualified business income plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income from their taxable income. The deduction is for owners of domestic businesses operated as a sole proprietorship or through a partnership, S corporation, trust, or estate. Individual taxpayers claim this deduction on their Form 1040, U.S. Individual Income Tax Return. In addition to individual taxpayers, some estates and trusts can also take the Section 199A deduction. A Section 199A deduction is not available for wage income or for business income earned through a C corporation.
The full report can be accessed here.