5 Tips To Complete Form 8995 With Ease

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The IRS Form 8995, also known as the Qualified Business Income Deduction (QBI), is a crucial tax form for eligible self-employed individuals and small business owners. The QBI deduction allows eligible taxpayers to deduct up to 20% of their qualified business income, which can significantly reduce their tax liability. However, completing Form 8995 can be a daunting task, especially for those who are not familiar with tax laws and regulations. In this article, we will provide you with 5 tips to complete Form 8995 with ease.

Understanding the QBI Deduction

Before we dive into the tips, it's essential to understand the QBI deduction and who is eligible. The QBI deduction is available to eligible self-employed individuals and small business owners who have qualified business income. Qualified business income includes income from sole proprietorships, single-member limited liability companies (LLCs), and S corporations. The deduction is calculated as 20% of the qualified business income, subject to certain limitations and phase-outs.

Tip 1: Determine Your Eligibility

To complete Form 8995, you need to determine if you are eligible for the QBI deduction. Check if you have qualified business income from a sole proprietorship, single-member LLC, or S corporation. You can use the IRS's QBI Eligibility Tool to determine if you meet the eligibility criteria.

Eligibility Criteria:

• You must have qualified business income from a sole proprietorship, single-member LLC, or S corporation.
• Your taxable income must be below the threshold amount ($164,900 for single filers and $329,800 for joint filers).
• You must have a qualified business interest in the entity.

Tip 2: Gather Required Documents

To complete Form 8995, you will need to gather certain documents, including:

• Form 1040: Your personal tax return.
• Schedule C: Your business income and expense statement.
• Form 1065: Your partnership tax return (if applicable).
• Form 1120S: Your S corporation tax return (if applicable).

Make sure you have all the necessary documents before starting to fill out Form 8995.

Tip 3: Calculate Your Qualified Business Income

Calculating your qualified business income is a critical step in completing Form 8995. You will need to calculate your total qualified business income from all sources, including:

• Business income from Schedule C.
• Partnership income from Form 1065.
• S corporation income from Form 1120S.

Use the IRS's QBI Calculator to help you calculate your qualified business income.

Tip 4: Complete Form 8995

Once you have calculated your qualified business income, you can complete Form 8995. The form consists of several sections, including:

• Section 1: Qualified Business Income.
• Section 2: W-2 Wages and Unemployment Insurance.
• Section 3: Qualified Property.

Make sure you complete all the necessary sections and attach Form 8995 to your tax return.

Tip 5: Seek Professional Help (If Needed)

Completing Form 8995 can be complex, especially if you have multiple businesses or complex tax situations. If you are unsure about any part of the process, consider seeking professional help from a tax professional or accountant. They can help you navigate the process and ensure you are taking advantage of the QBI deduction.

By following these 5 tips, you can complete Form 8995 with ease and take advantage of the QBI deduction. Remember to determine your eligibility, gather required documents, calculate your qualified business income, complete Form 8995, and seek professional help if needed.

We hope this article has been helpful in guiding you through the process of completing Form 8995. If you have any questions or comments, please feel free to share them below.