34 THE QUEENS COURIER • SEPTEMBER 6, 2018 FOR BREAKING NEWS VISIT WWW.QNS.COM
Pass-Through Entities Provision
of TCJA Brings Questions
Attorney At Law
25-59 Steinway Street
Astoria, NY 11103
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Salvatore P. Candela, EA, ATA, ABA
Enrolled Agent - Tax Advisor
BY JOHN SAVIGNANO, CPA
Clients are clamoring for information
on becoming passthrough
entities, thanks to a provision
in the Tax Cuts and Jobs
Act that allows for a 20 percent
deduction on qualified business
income received through a
small-business entity such as an
LLC or an S corporation.
If clients haven’t already filed
to become pass-through entities,
they’ve been asking whether
they should do so-and if they can
qualify for the deduction. While
on its face, the provision might
seem simple, there are actually
a lot of underlying complexities
that make answering these questions
a little tricky, at least not
without further IRS guidance.
For example, not every passthrough
entity can qualify for the
deduction-excluded are firms
engaging in what the bill calls a
“specified service trade or business.”
This includes the fields of
accounting, law, actuarial science,
performing arts, consulting,
athletics, financial services,
brokerage services, or any trade
or business where the principal
asset is the reputation or skill of
at least one of its employees.
It’s not always obvious whether
a particular pass-through
counts as a service business.
And what if someone owns
more than one kind of business?
Then there’s the matter of
whether people are using their
reputations to drive business.
If they are, they probably
won’t qualify for the 20 percent
Obviously, we’re thinking
about who within the firm
might benefit from the passthrough
deduction. It could
vary among partner groupsmore
senior vs. less senior partners.
Doing your own tax planning
in terms of what would be
the best model.
For those clients that set up a
pass-through entity in order to
take advantage of the deduction,
the question becomes,
“What type of entity is best? An
S corporation? A partnership?”
We don’t have regulations yet;
we still need to find out a little
bit more about this. Don’t
quickly rush into anything-wait
and find out a little more.
It’s very important to get the
whole playing field in front of
you before just saying, “Wow
20 percent; I’m going to change
John Savignano is a partner
with Savignano Accountants
& Advisors located at 47-46
Vernon Blvd., Second Floor, in
Long Island City. If you have
any questions or require additional
information, please call
John at 718-707-0955.