Most S-Corp and LLC owners we advise are taking the 20% Qualified Business Income (QBI) deduction on autopilot, inadvertently leaving tens of thousands of dollars on the table. Too often, preparers simply carry forward last year’s numbers under IRC § 199A without analyzing the underlying mechanics, filing the return and moving on.
Nobody is stress-testing whether your salary, entity classification, or retirement contributions are engineered to maximize this deduction.
Historically, the QBI deduction was scheduled to sunset, leading many to treat it as a temporary windfall rather than a core structural strategy. That has changed. With recent legislative updates cementing the 199A deduction and establishing a guaranteed minimum deduction, this is now a permanent fixture of your tax strategy. Under the current tax code, your business structure is either capturing this capital in full, or you are permanently forfeiting it to the Treasury.
This optimization becomes critical as your taxable income approaches the newly updated 2026 phaseout thresholds ($201,750 Single / $403,000 MFJ). Once you cross these thresholds, your deduction is strictly governed by the W-2 wage and UBIA (Unadjusted Basis Immediately After Acquisition) limitations outlined in Treas. Reg. § 1.199A-2.
The IRS frequently litigates the interplay between reasonable compensation (IRC § 162) and QBI. Small, strategic adjustments to your owner salary or retirement allocations can shift your allowable deduction by tens of thousands of dollars while protecting you from reasonable compensation audits.
Capturing this value is not a retroactive fix. Your corporate structure, payroll, bookkeeping, and tax strategy must be continuously synchronized under one roof:
- Statutory Entity Optimization: We analyze your current classification against the finalized IRC § 199A regulations, balancing W-2 wage bases and reasonable compensation to maximize the deduction limitation.
- Integrated Bookkeeping & Payroll: Managed by a unified team to ensure your financial records actively support your tax positions in real-time.
- Audit-Ready Technical Memos: We document every deduction position and QBI calculation, ensuring your file can withstand IRS scrutiny and aligns with recent Revenue Rulings.
- Quarterly CFO-Level Review: Proactive analysis of your balance sheet and income statements.
- Dynamic Tax Planning: Forward-looking strategies to keep you safely optimized around the phaseout thresholds as your revenue fluctuates throughout the fiscal year.
You still have a brief window to adjust your W-2 payroll runs, finalize retirement contributions, and execute entity restructuring before your numbers lock in at year-end. If you wait until December, the most impactful statutory levers are gone.
Reply to this email by Friday, and our scheduling coordinator, Nicole, will set up a complimentary 15-minute diagnostic review with our COO and Enrolled Agent, Liliya Maksimov. Upload your most recent business and personal tax returns to our portal https://dimovtax.com/upload-documents/ – we will show you exactly what your 199A deduction was, and mathematically prove what it should have been.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com