Skip to main content
July 12, 2020
Solved

Schedule K-1 Statement A Multiple Businesses & QBI Qualification

  • July 12, 2020
  • 1 reply
  • 0 views

Hi,

 

I'm using TurboTax desktop. How do I report Schedule K-1, Form 1041 Statement A (Section 199A) ordinary business income if my Statement A has more than one business listed as paying ordinary business income? The TurboTax form only provides me with the option to attribute the income to one business/employer ID. For example, Entity Y reported some amount of income for me, and Entity Z reported their own amount of income for me. They're both reported on the same Statement A of the K-1. However, I can't specify more than one business as the income source, and if I add the amounts together but only attribute them to one of the businesses, I'm worried I'll be misreporting. Any advice here would be appreciated.

 

Separately, I'm not familiar with QBI and I think this is the first time it may apply to me. Seeing the number entered for ordinary business income on this K-1 change the amount of my return is making me a little wary. I feel confident I'm reporting the information accurately per my K-1, so if my K-1 is accurate then I think I'm doing this right. Is there anything else I should check to be sure I don't misreport this?

 

Thanks very much for your help.

Best answer by DavidS127

The Qualified Business Income deduction is new starting in 2018, but in most cases provides a "20% of income" deduction from your taxable income for qualified business and estate/trust income.

 

Multiple Qualified Business Income (QBI) entities reported on a single K-1 require that a separate K-1 be entered for each entity reporting QBI (Section 199A amounts).  For each K-1, the Section 199A amounts associated with your box 14 code I (India) are entered on the "We need some information about your 199A income or loss" and "Let's check for some uncommon adjustments" screens that follow (several screens after) the last "box" screen.

 

Because your K-1 is reporting Section 199A information generated by the estate/trust and Section 199A information generated by at least one additional "passthrough" entity, you'll need to "split" this K-1 into separate K-1s for entry into TurboTax.  Enter one K-1 with only the "box" amounts generated by the "main" estate/trust, and an additional K-1(s) with only the "box" amounts generated by each separate passthrough entity. 

 

During the first part of the K-1 entry, all the separate K-1s use the name, address, and EIN of the "main" estate/trust shown in Part I and Part II of the K-1 you actually received.  

 

The boxes 1-14 on the K-1 you received are the combined totals of the main estate/trust and the passthrough entity.  You must figure out how much of each box 1-14 is for the main estate/trust versus each passthrough entity, and that is the "split" you use to enter the box 1-14 on the separate K-1s.  The total each numbered box for your separate K-1 forms must equal the total for that box on the K-1 you actually received.  For example, all box 1 amounts on the separate K-1s should add up to the box 1 amount for the actual K-1 you received.  If you can't figure (deduce) that "split" from the information you have, you will need to contact the preparer of the K-1 to get those amounts. 

 

The Section 199A Statement you received for box 14 code I should already "split" the Section 199A amounts between the entities, so you enter the Section 199A amounts for each entity on the K-1 you've created for that entity.

 

Note that when you enter each K-1, you'll encounter the question "Does the Section 199A income (from box 14) include business income from a business held by the trust or estate?".  When you answer Yes, TurboTax will ask for the name and EIN of each pass-through entity.

 

After this, you'll get the "We need some information about your 199A income or loss" and "Let's check for some uncommon adjustments" screens to enter the amounts from the Section 199A Statement that came with your K-1.

1 reply

DavidS127
DavidS127Answer
July 12, 2020

The Qualified Business Income deduction is new starting in 2018, but in most cases provides a "20% of income" deduction from your taxable income for qualified business and estate/trust income.

 

Multiple Qualified Business Income (QBI) entities reported on a single K-1 require that a separate K-1 be entered for each entity reporting QBI (Section 199A amounts).  For each K-1, the Section 199A amounts associated with your box 14 code I (India) are entered on the "We need some information about your 199A income or loss" and "Let's check for some uncommon adjustments" screens that follow (several screens after) the last "box" screen.

 

Because your K-1 is reporting Section 199A information generated by the estate/trust and Section 199A information generated by at least one additional "passthrough" entity, you'll need to "split" this K-1 into separate K-1s for entry into TurboTax.  Enter one K-1 with only the "box" amounts generated by the "main" estate/trust, and an additional K-1(s) with only the "box" amounts generated by each separate passthrough entity. 

 

During the first part of the K-1 entry, all the separate K-1s use the name, address, and EIN of the "main" estate/trust shown in Part I and Part II of the K-1 you actually received.  

 

The boxes 1-14 on the K-1 you received are the combined totals of the main estate/trust and the passthrough entity.  You must figure out how much of each box 1-14 is for the main estate/trust versus each passthrough entity, and that is the "split" you use to enter the box 1-14 on the separate K-1s.  The total each numbered box for your separate K-1 forms must equal the total for that box on the K-1 you actually received.  For example, all box 1 amounts on the separate K-1s should add up to the box 1 amount for the actual K-1 you received.  If you can't figure (deduce) that "split" from the information you have, you will need to contact the preparer of the K-1 to get those amounts. 

 

The Section 199A Statement you received for box 14 code I should already "split" the Section 199A amounts between the entities, so you enter the Section 199A amounts for each entity on the K-1 you've created for that entity.

 

Note that when you enter each K-1, you'll encounter the question "Does the Section 199A income (from box 14) include business income from a business held by the trust or estate?".  When you answer Yes, TurboTax will ask for the name and EIN of each pass-through entity.

 

After this, you'll get the "We need some information about your 199A income or loss" and "Let's check for some uncommon adjustments" screens to enter the amounts from the Section 199A Statement that came with your K-1.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"
james120Author
July 14, 2020

Excellent & timely response - sorry for my delayed reply, I didn't see this come through. You've already been so helpful but if you have time I have one follow-up question to make sure I understand.

 

The main estate/trust reporting my K-1 reports information directly related to them only on the first page of the Schedule K-1 (Form 1041). Specifically, it has reported information in boxes 1, 5, 7, and 14 (codes E & H).

 

On my K-1, Code I (India) in box 14 and the accompanying Statement A (199A) report information only from 2 pass-through entities. The main trust/estate did not report any of its own information here.


Am I correct in thinking that what I should do is file one K-1 for the main estate/trust with information in boxes 1, 5, 7 and 14 (codes E & H) and two separate K-1's where I leave blank 1, 5, 7 and 14 (codes E & H) and report only the information in box 14 code I and accompanying entity-specific information from Statement A (199A)?

 

Thanks again, I appreciate it.

DavidS127
July 14, 2020

No, you must deduce the "split" of those box 1, 5, 7, and 14 amounts between the main entity and the passthroughs.

 

So, take a look at the Section 199A information reported for the passthrough entities, and compare that to the box 1, 5, and 7 amounts reported on the actual K-1.  If the Section 199A for the passthrough entities is, say, $50 each of rental income for $100 of total "rental income" from both passthrough entities, and the box 7 net rental real estate income $100, then all the box 7 $100 goes on the passthrough entities' box 7 ($50 each) and none goes on the "main entity" K-1. 

 

If the passthroughs report Section 199A ordinary income, you'll have to similarly "deduce" in which boxes that should be reported (box 1, box 5), and leave the "balance" on the "main entity K-1" box 1, box 5.

 

Box 14 is for investment income, and once you figure out the box 1 and box 5 you can hopefully deduce how much belongs on each passthrough K-1, with any "balance" on the "main entity K-1.

 

When you are finished, the box 1 for all three K-1s you entered should equal the box 1 amount on the actual K-1, and so forth.

 

If you can't determine the split for the information you have, you will need to contact the preparer of the K-1.

 

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"