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IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

The major issue is that TurboTax report as I have earned 3k of income interest, well above the real income. Any advise?
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13 Replies

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

What type of K-1 is this and which lines are populated with figures?

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Thanks -  Form 1065, fields 1 (loss), 5, 6, 9a, 9, 11zz, 13H, AE,ZZ, 16, 17F 18, 20,21

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

I'm going to page @Mike9241 for input, but is this a partnership (or multi-member LLC) in which you materially participate or are you a limited partner? 

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Thanks - limited partner

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?


@IP5 wrote:

Thanks - limited partner


The problem here is that the loss shown on Line 1 is suspended (Form 8582) since it is a passive loss for you (as a limited partner).

 

On the other hand, the interest income, dividends, and any capital gain are all currently taxable.

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Thanks  tagteam, so this means I need to pay tax as high as the income from this partnership?

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

 Here are the fgiures:

  • Ordinary business income (loss): ($1,800) - The partner's share of the partnership's operating loss.
  • Interest income: $3,130 - Interest earned by the partnership.
  • Ordinary dividends: $380 - Dividends received that are taxed at ordinary income rates.
  • Qualified dividends: $125 - Dividends that may qualify for lower tax rates.
  • Dividend equivalents: $5 - Often related to certain financial instruments.
  • Net short-term capital gain (loss): $2 - Profit from the sale of assets held for a year or less.
  • Other income (loss): $3040 - Income from sources not categorized elsewhere.
  • Section 179 deduction: $12 - An expense deduction for certain business assets.
  • Other deductions: $1050 & $175 - Various expenses deducted by the partnership.
  • Alternative minimum tax (AMT) items: 3 - Items that may be relevant for AMT calculations.
  • Tax-exempt income and nondeductible expenses: 3 - Income not subject to tax and expenses that cannot be deducted.
  • Distributions: 25 - Cash or property distributed to the partner.
  • Other information: 3,11 & 12 - Likely refers to additional details provided in attached statements.
  • Foreign taxes paid or accrued: 12 - Taxes paid to foreign countries

 

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?


@IP5 wrote:

Thanks  tagteam, so this means I need to pay tax as high as the income from this partnership?


You are welcome and, yes, your share of the loss on Line 1 is not immediately deductible but is suspended under the passive activity loss rules. 

 

As a result, you're subject to tax on your share of the interest, dividends, and other income.

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Many thanks - so is there any point to continue to invest in such an instrument? 

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?


@IP5 wrote:

Many thanks - so is there any point to continue to invest in such an instrument? 


You can read through the article at the link below (re PTPs), but it really depends on the nature of the PTP, your risk tolerance, and other factors.

 

https://www.thetaxadviser.com/issues/2019/apr/publicly-traded-partnerships-tax-treatment-investors.h...

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Thanks!

Itamar

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Form 1065, fields 1 (loss), 5, 6, 9a, 9, 11zz, 13H, AE,ZZ, 16, 17F 18, 20,21

 

different lines flow to different forms and schedules in your 1040. some you can enter in Turbotax but it will do nothing with them. you may see an * by those items which Turbotax doesn't use. all your told is to enter on appropriate form. 

lines 5 an6 flow to schedule B

there is no line 9 only 9a that flows to schedule D

can't help with 11zz that could be for either schedule e page 2 as part of the k-1 income or loss or schedule 1 other income/loss. Turbotax should provide a sub-schedule where the amount is also entered to carry to a particular form or schedule except other income/loss on schedule 1 the * type item - sadly most k-1s provide no info as to which so choose 

13H should flow to form 4952 investment interest expense but you may not see the form if you don't itemize. in other words, if you don't itemize your deductions, you lose the tax benefit of the deduction and even if you do itemize there can be a limitation as computed on the form

 

13AE will produce no tax benefit for federal purpose because portfolio deductions are no longer allowed. however, if you have a state income tax there may be a benefit since some states with an income tax do allow the deduction

13ZZ you are your own because it is non-standard

16 you may need to complete the K-3 section of the k-1 this is primarily to get a tax credit or deduction for the foreign tax credit on line 21. some k-3 info Turbotax does not do but in some cases the k-3 form may have info that is not relevant to your 1040. 

17F is for alternative minimum tax purposes only. it may flow to form 6251. however, you may not be required to file form 6251 so you may not see it in your return 

18 only code A

line 20 can contain over 50 different items. there should be a supplement that lists the amount for each code.

again, some can be relevant to your taxes, others not. some are not standard. 

line 21 FTC really gets reported in the k-3 segment of your 1040.

 

IP5
Level 1

Hello, I am entering K1. The real income is 1.3k. However, in k1 the income is 6.3k, and the loss and deduction is 5k, and total tax is 1.2k. What did I do wrong?

Thanks Mike9241

Below are the figures of the K1. Please note that the partnership (not a PTP) gave me an income of 1,300. According to what you wrote and what I did in TurboTax, I have a similar amount to the taxman, which mean I have no profit.  In this case no point to invest in it, correct? Am I missing something?

 

 

Here are the figures:

  • Ordinary business income (loss): ($1,800) - The partner's share of the partnership's operating loss.
  • Interest income: $3,130 - Interest earned by the partnership.
  • Ordinary dividends: $380 - Dividends received that are taxed at ordinary income rates.
  • Qualified dividends: $125 - Dividends that may qualify for lower tax rates.
  • Dividend equivalents: $5 - Often related to certain financial instruments.
  • Net short-term capital gain (loss): $2 - Profit from the sale of assets held for a year or less.
  • Other income (loss): $3040 - Income from sources not categorized elsewhere.
  • Section 179 deduction: $12 - An expense deduction for certain business assets.
  • Other deductions: $1050 & $175 - Various expenses deducted by the partnership.
  • Alternative minimum tax (AMT) items: 3 - Items that may be relevant for AMT calculations.
  • Tax-exempt income and nondeductible expenses: 3 - Income not subject to tax and expenses that cannot be deducted.
  • Distributions: 25 - Cash or property distributed to the partner.
  • Other information: 3,11 & 12 - Likely refers to additional details provided in attached statements.
  • Foreign taxes paid or accrued: 12 - Taxes paid to foreign countries
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