STATUTORY EMPLOYEES AND QBI
September 30, 2019 - Douglas Myser
Statutory employees and qbi. Section 199A of the Internal Revenue Code provides many taxpayers a deduction for qualified business income (QBI) from a qualified trade or business operated directly or through a pass through entity. The deduction has two components. Eligible taxpayers may be entitled to a deduction of up to 20 percent of qualified business income (QBI) form a domestic business operated as a sole proprietorship or through a partnership or through a partnership S corporation, trust or estate. Income earned through a C corporation or by providing services as an employee is not eligible for the deduction. Statutory employees and qbi.
Eligible taxpayers may also be entitled to a deduction of up to 20 percent of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income. This component of the section 199A deduction is not limited by W-2 wages or the UBIA qualified property. The sum of these two amounts is referred to as the combined qualified business income amount. Generally, this deduction is the lesser of the combined qualified business income amount and an amount equal to 20 percent of the taxable income minus the taxpayer's net capital gain. The deduction is available for taxable years beginning after December 31, 2017. The deduction is available, regardless of whether an individual itemizes their deductions on Schedule A or takes the standard deduction. The question is being raised as to whether or not a statutory employees, who completes the IRS Schedule C, Profit or Loss form a Business, is eligible to claim the Section 199-A pass through deduction.
One of the requirements of being a qualified trade or business for purposes of claiming the QBI deduction is that the taxpayer must not be in the trade or business of performing services as an employees. Prop. Regs. Sec. 1-199A-5(d)(1). Prop Reg. Sec. 1.199A-5(d)(1) further specifies that "income from the trade or business of performing services as an employee refers to all wages--and other income earned in a capacity as an employee.
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