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16071: QBI Deduction - Business Aggregation


QBI

How is qualifying business income calculated when there are multiple businesses? What are the rules and guidelines?
 
The qualified business income is calculated for each business, then all QBI amounts are combined before calculating the total allowable deduction. You can elect to combine different businesses for the purposes of QBI. To elect to aggregate multiple businesses, use the BAN field on each screen for the businesses that should be combined. Enter the same number to tie multiple screens together. If you do not elect to combine or aggregate the businesses, no entry should be made in the BAN field(s).
 
Generally, Wks QBI Simple shows each business on a separate line which is then used to calculate the QBI. When multiple businesses are being aggregated, line 1, column A will show Business Aggregation Group #1 and column C will show the total qualified business income or loss from the businesses being aggregated.
Note:  
  • If the cumulative amount is a loss from all businesses, the amount will be carried forward as a loss to the next year, and will reduce the QBI in future years. 
  • While aggregating businesses for the purpose of QBI could result in a higher deduction, in some circumstances aggregation could result in a lower deduction. You will need to determine whether you want to elect to aggregate businesses for QBI purposes.

The IRS has provided some guidelines regarding whether or not a taxpayer's businesses can be aggregated for QBI deduction purposes. These guidelines are summarized below. As the preparer, you should review all IRS guidelines and limitations before making the election to aggregate. 

  1. The taxpayer, or a group of persons, directly or indirectly own 50% or more of each trade or business for a majority of the tax year and all trades or businesses use the same tax year end,
  2. None of the trades or business are a specified service trade or business, and
  3. The trades or business meet at least two of the following factors.
    • They provide products or services that are the same or that are customarily offered together.
    • They share facilities or share significant centralized business elements such as personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology resources.
    • They are operated in coordination with, or reliance upon, one or more of the businesses in the aggregated group.

Important: You cannot choose to change this election in future years unless the facts and circumstances of the businesses change and the businesses are no longer allowed to be aggregated for the purposes of QBI.


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