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Based on the new federal tax plan released yesterday.... We…

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Based on the new federal...
Based on the new federal tax plan released yesterday.... We have an LLC with 3 partners and no W-2 wages. We develop and sell software to companies across the world. Starting in 2018, will all of our annual profit be eligible for the individual 20% pass thru deduction on each of the partners person tax returns. The annual profit is split by the partners each year. No salaries are drawn.
Submitted: 2 months ago.Category: Tax
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Answered in 11 minutes by:
12/16/2017
Tax Professional: Barbara, Enrolled Agent replied 2 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,783
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

The bill has not yet passed, but is expected to by the end of next week

The tax burden on owners, partners and shareholders of S-corporations, LLCs and partnerships -- who pay their share of the business' taxes through their individual tax returns -- would be lowered by a 20% deduction.

The 20% deduction would be prohibited for anyone in a service business -- unless their taxable income is less than $315,000 if married ($157,500 if single).

The following link contains excellent information regarding the tax reform bill which you will find helpful:

http://money.cnn.com/2017/12/15/news/economy/gop-tax-plan-details/index.html

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 2 months ago
Thanks Barb. So even though the LLC pays no W-2 wages, all of the LLC's annual profit would be treated as business income and thus the partners would be eligible for the 20% deduction? We are not required to take a salary that is taxed at the individual rate?
Tax Professional: Barbara, Enrolled Agent replied 2 months ago

Partnerships are "pass through" entities. Any profit/loss is passed through to the partners to include on their personal tax returns.

Partners do not receive W-2s.

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Tax Professional: Barbara, Enrolled Agent replied 2 months ago
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Customer reply replied 2 months ago
On the partners K-1 forms the majority of the income is reported as Guaranteed Payments. Will that be an issue?
Tax Professional: Barbara, Enrolled Agent replied 2 months ago

Guaranteed payments are made without regard to the annual profit or loss of the business. The partner reports these payments as ordinary income and pays self-employment tax on them.

The 20% pass through deduction applies to the profit passed through to the partners.

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Barbara
Barbara
Barbara, Enrolled Agent
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