IRS To Consider More Industry Input On 20% Passthrough Deduction

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The Internal Revenue Service is considering revising how they respond to passthrough eligibility questions. While IRS officials have not yet decided how to move forward, they are interested in discussing with associations and other interested parties whether there is a way to develop industrywide standards as an alternative to private letter, case-by-case rulings for determining whether an entity qualifies for the 20% pass-through deduction.

 

Final regulations published in January (See Tax Alert #31) laid out "specified service" definitions for businesses that were prohibited from taking the deduction if the owners' income was greater than $207,500 for single filers and $415,000 for joint returns. Service provider owners in the fields of consulting, health, law accounting, performing arts, athletics, finance, investment, and trading are among those precluded from taking the deduction, assuming their income exceeds the above thresholds.

 

Industry groups worked feverishly through the rulemaking process to get their members excluded from being a "specified service." But questions abound relating to unique facts and circumstances, and addressing them through the private letter ruling process is time-consuming for the IRS and not necessarily helpful to similarly situated taxpayers who cannot rely on the ruling. Therefore, the IRS is interested in providing guidance that could be helpful to a multitude of taxpayers by laying out industry standards, if at all practicable.

 

Contact your LMC professional for information about how specific passthrough deduction provisions affect you. All our prior Tax Cuts and Jobs Act Alerts are available on the Updates page of our website.

 

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