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IRS Releases 2019 Draft Forms for Qualified Business Income Deduction Calculation

IRS Releases 2019 Draft Forms for Qualified Business Income Deduction Calculation

Less than 9 months after releasing the final Section 199A regulations, the IRS has released draft forms and instructions to be completed when a Qualified Business Income (QBI) deduction is reported on a taxpayer’s 2019 tax return. 

In 2018, QBI calculations and deductions were completed on a supplemental worksheet within various tax software programs.  The worksheet summarized the income, contributions, expenses and self-employment activity in order to determine the allowable deduction to the taxpayer. 

There are two forms being released, Form 8995 and Form 8995-A.  For taxpayers whose taxable income before the QBI deduction is less than certain thresholds (i.e. $160,700 single, $321,400 married filing jointly), Form 8995 Qualified Business Income Deduction Simplified Computation can be used.  This one-page form mirrors the 2018 worksheet produced within tax software but allows both the taxpayer and preparer to follow more easily how the deduction is calculated. 

In situations where a taxpayer does not qualify for the simplified form, Form 8895-A Qualified Business Income Deduction must be completed.  This form provides a more comprehensive approach in calculating the QBI deduction and includes separately prepared supplementary schedules for Specified Service Trades or Businesses (Schedule A), Aggregation of Business Operators (Schedule B), Loss Netting and Carryforward (Schedule C) and Special Rules for Patrons of Agricultural or Horticultural Cooperatives (Schedule D).

While the accounting and tax industry are becoming more comfortable with the regulations and calculations surrounding the QBI deduction, these newly released forms, schedules and instructions will provide preparers a more concise way of calculating a taxpayer’s QBI deduction. 

To view the draft forms and instructions, visit:

https://apps.irs.gov/app/picklist/list/draftTaxForms.html;jsessionid=G14dnPxOGSGFI1NMjtqN-qVh_jrOaqMr_jk-vFOi.20?value=8995&criteria=formNumber&submitSearch=Find

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Article written by William Hall