Senator Proposes Letting Accountants, Other Professions, Have Access to 199A Deduction as Well

By:
Chris Gaetano
Published Date:
Jul 21, 2021
Ron Wyden 450

Sen. Ron Wyden (D-Ore), chair of the Senate Finance Committee, has proposed legislation that would open up the 199A deduction for pass-through entities to accountants, lawyers, doctors and other professions that had previously been barred. 

The bill, called the Small Business Tax Fairness Act,, targets the provision of 199A, implemented as part of the Tax Cuts and Jobs Act, that prevented those in "specified services" from using the 20 percent deduction. Included in those specified services are professions involved in accounting, law, medicine, actuarial services, performing arts, consulting, professional athletics, financial services, brokerage services, investing and investment management and securities traders. Also included is "[a]ny trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners." 

"The current limitations cause tremendous confusion for taxpayers trying to figure out if they are a “specified service trade or business” without an army of accountants and lawyers," said the senator. 

Wyden's bill gets rid of all of these restrictions, opening the deduction up to any trade or business other than the trade or business of performing services as an employee. He said these restrictions were arbitrary and served only to shut out middle class professionals, to the benefit of wealthy corporations. He said that 61 percent of the monetary benefit of the pass-through deduction goes to the top 1 percent of households. 

The bill would also establish a single threshold for determining eligibility for the deduction, rather than  formulas and limitations based on W-2 wages and qualified investments. Specifically, it would be $400,000 in revenues. Finally, cementing the senator's intention to make this provision more for the middle class, the bill would begin phasing out the deduction after this point. 

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