A provision of the tax code allows owners of small businesses to avoid paying tax on 20% of their small business profits. This provision is called the Qualified Business Income Deduction (“QBID”). This deduction is limited if the small business is a Specialized Services Trade or Business (“SSTB”). An SSTB is a business in the fields of health, law, accounting, performing arts, consulting, athletics, financial services, brokerage services, or investing. We often see service-based businesses erroneously classified as “consulting” businesses by other CPA firms. This classification limits this valuable deduction. The definition of “consulting” is not very broad and normally doesn’t describe the client’s business operations so we often amend the client’s tax returns to claim this valuable deduction. If you think your QBID deduction is being limited because you were classified as a consulting SSTB (confusing…I know), then reach out to us so we can have a look.
Accounting and Consulting