The Section 199A Report

The Section 199A Report is available from Sage Fixed Assets - Depreciation. It provides a means to calculate the fixed assets portion of IRS Code Section 199A, Qualified Business Income (QBI).

Overview – Purpose of report

Before you begin

1. Run depreciation on all assets through the report date before running the report. Only assets depreciated through the run date appear on the report, including those with Depreciation Method = NO.
   • Running depreciation as of the report date ensures assets fall into the correct section.
     It also updates Bus Use % for calculating the correct Acquired 199A Value.
2. See the Additional Information section below for more about categories, groups, and special tax situations.

In Sage Fixed Assets - Depreciation

1. Go to Reports, Tax Reports, select Section 199A Report.
2. Select the Group (for example, All complete Assets).
3. Select the Book (usually Tax). See the Tax Notes in Additional Information section below for more details.
4. Choose the run Date.
   • Run all assets through the Fiscal Year end.
   • Use this date for the final tax return report.
5. Configuration: Check the Display assets not included in the 199A calculation box to see Category III assets.

Additional information about the 199A report

Qualified Assets on the Section 199A Report

• Bonus and Section 179 don’t affect when an asset qualifies or its category in reports.
• Use the GDS life table to determine Estimated Life. Check the Tax Notes section below for more details.

Qualified Assets

Assets included in the calculation on the 199A Report are:

• tangible and depreciable.
• used at any point during the taxable year in the trade or business to generate QBI.
• available for use at the taxable year-end.

The depreciable period for the assets:

• didn't end before the close of the tax year.
• For the 199A calculation, use the later of 10 years or the last full depreciation year. Start counting after you place the asset in service.
   NOTE: Exclude assets from the calculation if Estimated Life is 10+ years and Remaining Life is under 12 months. 

Excluded Assets

The system won't include these assets in the 99A calculation:

• Not held and available for use at the end of the year.
• Intangible, such as goodwill.
• Not depreciable (that is, Depr Method = No), such as land or assets temporarily out of service.
• Depreciable assets are held for investment use.
• Not used during the taxable year in the production of qualified business income.
• Qualified in prior years but are now beyond their recovery period for Section 199A purposes.

The Section 199A Report’s logic will categorize most assets correctly based on their placed-in-service date and other factors. See Reasons to create a group below for unique cases.

Asset Categories and Report Sections

For each category of assets, there’s a corresponding report section.

Category I Assets

• These are the Qualified Assets above that you placed in service in the last 10 years. Regardless of estimated life.
• They display in the first section labeled as Assets PIS Within the Last 10 Years (Category I).
• After 10 years the system reclassifies the asset into Category II or Category III, depending on estimated life.

Category II Assets

They display in the second section labeled as Category II Assets.

For example,  

• You place a 15-year GDS life property in service in December 31, 2009.
• The taxable year ended is December 31.
• The asset was eligible for and expensed fully under Section 179 in 2009.
• For tax years ending before 12/31/2019, it’s included in Section I.
• For tax years ending 12/31/2019 to 12/31/2023, it’s included in Section II.
• For tax years ending after 12/31/2023, it is in Section III.

Category III Assets

• These assets are active assets that are Excluded Assets, as described above.
• The system labels the third section of the report Assets Not Included in the 199A Report Calculation. 
• This category includes assets with under 12 months of recovery life based on Estimated Life.
• They were Category I or Category II assets before.
• This section appears in the 199A Report on the right side of the report definition. They display only if you select the checkbox Assets not included in the 199A calculation.
• This section prints a Grand Total at the bottom for the 199A Acquired Value and Acquired Value columns.
• Reconcile the Acquired Value Grand Total from the 199A Report with the Depreciation Expense Report Net Grand Total.

Groups and Filtering

199A Filter

The Section 199A Report filters and organizes assets as follows:

• Includes Active Assets, Activity Code = A, D, F, J, K, L, M, or N
• Excludes all inactive assets including transfers and disposals
• Includes Amortizable Assets (Property Type = Z) in Category III
• Includes Assets with Depr Meth = No in Category III, such as land and assets temporarily out of service
• Ignores Depreciable Basis for report filtering
• Ignores Bonus and Section 179 deductions taken (no impact on calculations or categorization)
• Ignores future-dated assets with a PIS Date after the report run date

Groups

• You can use a standard group (for example, Active Assets) to run the report. This depends on which assets you’re depreciating.
• You can also use an existing custom group to run the report.
• If needed, You can use a newly created group that includes the required and allowable assets.
• Reasons to create a Group.

To exclude assets that you didn't use in generating trade or business income, but the system listed on the Depreciation Schedule

• Investment property.
• Assets sold, but not yet delivered. Assets you’ll sell that you no longer use in the business.
• Assets listed on the Depreciation Schedule, but not yet in service or complete.

To separate assets in a single Sage Fixed Assets company that belong to multiple legal entities.

• For purposes of 199A, each legal entity must have a separate calculation.
  

The Section 199A Report ignores Sort Criteria in Group Manager to reduce report complexity. If an existing group has Sort Criteria entered, the system will suppress it.

• If sort criteria are critical, like organizing assets by legal entity, create a new Group for each entity.
• Create a Group as usual and include or exclude assets needed for the 199A Report calculation. Make sure you haven't filtered out these assets by the report settings described above.

Tax Notes

• Use the GDS life for assets for the 199A Calculation.
• If the Tax book uses ADS life, like Estimated Life = 10 instead of GDS = 7, adjust. Create a new book using GDS life to ensure the Section 199A Report is accurate.
• There’s an anti-abuse provision in the regulations that excludes assets as described in the scenario below. If necessary, manually exclude these assets from the report.
• Property doesn't qualify if you acquire it within 60 days of year-end and dispose within 120 days. Use in business for 45 days unless you prove another purpose beyond increasing the 199A deduction.