What Do The Final 199A
Regulations Mean For You?
Understanding The Impact Regulations Will Have On QBI
Many were hoping the IRS’s final 199A
regulations
would
result
in
greater
clarification. Instead many of us were left
with more questions than answers – especially
if you recently sold to a cooperative that
operates under an entirely different tax year.
The
qualified
business
income
(QBI)
deduction is the much-talked-about 20 percent
deduction based on profits of all non-C
corporation qualified businesses. Under the
199A regulations, the QBI could potentially
reduce some of your tax liability. On the other
hand, the cumbersome calculation may only
provide minimal benefit.
you’ll need to give your tax preparer details ending in 2018. Any payments received by
about the timing of all 2018 sales to all a farmer during 2018 that were included in
cooperatives. This will allow your preparer a cooperative’s taxable year can’t be used
to properly compute any domestic production to calculate QBI. You can only deduct the
activities deduction (DPAD) and the QBI DPAD you collected that passed through the
before the co-op’s year-end (assuming deduction. Your CPA will need: cooperative. For this tax season, many grain
their year ended in 2018) •
With regard to filing 2018 taxes, farmers will
have to break down their revenue into three
buckets:
•
•
Payments received in 2018 from a co-op
allocation in order to properly report the
Payments received in 2018 after its year-
199/199A DPAD
end
•
All other payments
•
WHAT YOU WILL
NEED TO PROVIDE
YOUR TAX ADVISOR
If you haven’t already filed your 2018 return,
or if you’re planning to amend your return,
A copy of Form 1099-PATR
(Taxable Distributions
The calculation for QBI in 2018 for farmers
will then be based on all three of these factors.
A copy of each written notice of DPAD
•
much of a QBI deduction, and they won’t
receive any DPAD from the cooperative
(since that ended in 2017). You’ll calculate
the QBI deduction differently for 2019. The
“grain glitch” fix bill states that while the
Received From Cooperatives) DPAD is generally repealed for calendar-year
A breakdown of the sales and patronage the DPAD deduction received in 2018 from
received from the cooperative from fiscal-year cooperatives.
Jan. 1, 2018, until the cooperative’s
year-end. You might be able to get this
from your cooperative.
farmers after 2017, farmers can still claim
Cooperatives will need to provide farmers
with the amount of qualified payments made
to the farmer in 2018 that were included in
In the past, a cooperative typically only the cooperative’s Section 199 computation
needed to provide their tax preparer with a from Jan. 1, 2018, to the last day of the
copy of Form 1099-PATR. A cooperative is cooperative’s fiscal year ending in 2018.
now required to provide Form 1099 PATR
by: Joel Yoder, CPA
Manager
212 North Washington St.
Millersburg, OH 44654
330.521.4536
[email protected]
and dairy farmers will likely not qualify for
and a written notice of allocation of DPAD. The bottom line is, QBI is not an easy task
THE TRANSITION PROVISION understands the new QBI deduction and the
There’s a new transition provision regarding
qualified payments made by a cooperative
that had a fiscal year starting in 2017 and
to tackle. Talk with an advisor who not only
final regulations, but has experience working
with farmers. Give me a call to further discuss
this complex matter.
Rise & Shine • Spring 2019
5