WHAT A DAY! My three most trusted sources (Tony Nitti, NATP and Compass Tax Educators) for information on the new 199A QBI deduction have all reported extensively on the newly-released final guidance from the IRS. There is a lot that has changed from the proposed regs, and much that will work differently than all of my tax course instructors (including those at the IRS Tax Forum) anticipated.

First, from the National Association of Tax Professsionals (if you are a practitioner and not yet a member, you owe it to yourself to join — let me know and I’ll get you a referral code):

The IRS has released the long-awaited final regulations concerning the deduction for qualified business income (QBI) under §199A. QBI can affect certain individuals, partnerships, S corporations, trusts and estates. The final regulations are 247-pages long. It is noted that the rules provided in the final regulations as well as the proposed regulations issued in August, can be relied upon for taxable years ending in 2018.

In addition, the IRS released new proposed regulations which provide guidance on the treatment of previously suspended losses that constitute QBI. Also, the regulations provide guidance on the determination deduction for taxpayers that hold interests in regulated investment companies, charitable remainder trusts, and split-interest trusts.

Also released was Rev. Proc. 2019-11 which provides procedures for calculating W-2 wages. The guidance provides three methods that can be used to calculate W-2 wages. The first method (the unmodified Box method) allows for a simplified calculation while the second and third methods (the modified Box 1 method and the tracking wages method) provide greater accuracy. W-2 wages calculated under this revenue procedure are not necessarily the W-2 wages that are properly allocable to QBI and eligible for use in computing the section 199A limitations.

The last item issued was Notice 2019-07 for a §199A safe harbor for rental real estate enterprises. To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of §199A if the enterprise otherwise meets the definition of trade or business in §1.199A-1(b)(14).

They will be reviewing these newly released documents and will provide members with a summary next week.

Meanwhile, Toni Nitti published a first-stab article on the new guidance, and as usual, has knocked it out of the park: IRS Publishes Final Guidance On The 20% Pass-Through Deduction: Putting It All Together

I love that he gave the IRS so much credit for getting these out there before tax season (honestly, none of us expected that to happen) — during a shutdown and with hampering budget cuts already crippling the agency.

It was less than 13 months ago that Congress dumped 500 pages of sloppy statutory language on the Service in the form of the Tax Cuts and Jobs Act, and somehow, in that span the IRS has managed to provide final regulations on the most controversial, convoluted and complicated provision of the new law: Section 199A, better known as the “20% pass-through deduction.” It required a Herculean effort, particularly when you consider that, you know…most of the government has been on unpaid leave since December 22nd.

His analysis is spot-on, as usual, and you’re doing yourself a favor to devour the entire article word-for-word.

And then we’ve got Tom Gorczynski, a talented EA and tireless educational contributor to colleagues everywhere, who has put together a four-hour webinar on the topic in record time, knowing we’re all eager to learn how this works before tax season opens January 28, rather than after.

I’ve already spent over a month of non-billable time learning the new tax law, so I figure, what’s one more day, right?