Is Court Reporting Considered a Specified Service Trade or Business (SSTB) under the new law?
Due to the new tax law changes made in 2019, some questions about whether or not court reporters (or court reporting firms) qualify for the 199A tax deductions have come up. The answer seems to hinge on whether or not stenography is one of the exempted SSTBs. Or does it fall under the larger law category?
First, here is the IRS brief about this issue:
And now some opinions from various sources who all seem to agree that 'stenography' is not an SSTB:
The “performance of services in the field of law” is defined in the proposed regulations as “the performance ofservices by individuals such as lawyers, paralegals, legal arbitrators, mediators, and similar professionals performingservices in their capacity as such.” Not caught in the SSTB trap are printers, delivery services, or stenographyservices. As such, court reporters who own all or a portion of their business may look forward to the QBID.
2. Law – Proposed §1.199A-5(b)(2)(iii)“Performance of services in the field of law means the provision of services by lawyers, paralegals, legal arbitrators,mediators, and similar professionals…”This does not include the provision of services that do not require skills unique to the field of law including:
• delivery services
• stenography services
Somewhat similarly, services in the field of law are defined as “the performance of services by individuals such aslawyers, paralegals, legal arbitrators, mediators, and similar professionals performing services in their capacity assuch” and does not include the provision of services that do not require skills unique to the field of law. Forexample, this would appear to exclude from the SSTB definition a firm that exclusively provided printing, deliveryservices, or stenography services, apparently even if the business provided such services only in connection withlegal matters, such as a legal printer or a process server. However, if a law firm or its owners purported to providesuch services separately from its traditional legal services, the taxpayer would need to scrutinize the anti-abuse rulerelating to activities that are “incidental” to an SSTB.
So, what that means is, if a lawyer owns his own firm, and sets up another company to do dictation and stenographyfor the law firm - services that do not fall under the practice of law - that company will not qualify for its 20%deduction under 199A. The kicker is, these services would otherwise fall under the 199A deduction, but because alawyer owns 51% of the stenography company it will not qualify for its deduction.
Law. Prop Reg § 1.199A-5(b)(2)(iii) provides that the performance of services in the field of law means theprovision of services by lawyers, paralegals, legal arbitrators, mediators, and similar professionals in their capacity assuch. It does not include the provision of services that do not require skills unique to the field of law, for example,the provision of services in the field of law does not include the provision of services by printers, delivery services,or stenography services.
What do you think?
Wednesday, February 6, 2019