How to enter multiple Sec 199 passthru entities

[Max_defender]

I am not a tax professional, but I can tell you what worked for me in the past.

The K-1 has separate sections for reporting at the state level because the states have

various accounting rules.  The NY state section includes various totals. When in doubt,

I enter the values from the NY state section into Ttax, and the IRS accepts the return--every time so far.

My situation is not multiple businesses, but multiple rental properties owned by a single LLC.

Example:

find "New York Partner's Schedule K-1"

Box 10 net 1231 gain   $23,000.00

This seems to be the total for all the properties.  And I put it in the 199A income section.

same for W-2 wages.

[AliciaP1]

Since you received 1 Schedule K-1 from the PTP but have multiple columns of Section 199A income, you can add all the QBI component columns together and enter it as a total.  The only time you need to enter additional Schedule K-1s is if the QBI income is related to different boxes of income (box 1, 2, or 3).

@mdaramola   

[Browniela]

I have ~80 pass through entities from a K-1 Partnership.  Did anyone determine an easy to solve this?

Having to enter 10 for another K-1 was painful enough with the address and 4 boxes needing to be filled out and going through every single inefficient screen.  Please let me know if there is an easy way to add the K-1 details.

[markmartian]

This is still the only way to enter these type K-1s using Turbotax.  The other tax programs aren't any better.  It stinks.  You can either hold your nose and do this extremely annoying way, or pay an accountant through the nose to do these types of returns.  And if you don't get an accountant that specializes in complex K-1 business returns (and pay them literally thousands of $), they likely won't fully understand it and will do it wrong, too.  I have associates that have experienced this and end up with accountants charging $5-10K to do their taxes (crazy).  It's why I'm moving away from investments that issue K-1s with multiple pass through entities.  The returns don't justify the hassles.

[alexonski]

I have made a similar observation to @davidtoby above on April 11, 2021 in that entering a net loss for a passthrough entity in the 199A section of an auxiliary K-1 increases my tax due. This seems to be a calculation error or bug in Turbotax.

I have two schedules K-1 to enter, one of which involves multiple 199A pass through entities in rental real estate, each of which in turn has a net loss. My other K-1 has a positive income and does not involve a passthrough entity.

Since TT only has the ability to handle one pass through entity (Box 20, code Z) per K-1 statement, I have followed the advice of several experts on this site to create an auxiliary K-1 schedule in TT for each additional passthrough entity beyond the first. According to the advice, for each auxiliary TT schedule, I entered only the partnership information from my received K-1, leaving all boxes blank except Box 20 for which I entered code Z. I then entered the passthrough entity in the associated 199A section of the auxiliary K-1 schedule.

TT, however, does not seem to handle the calculations correctly in the above scenario. For example, as each auxiliary K-1 is created, when entering a net loss of the passthrough entity (which should be disallowed for tax credit purposes anyway), my taxes owed increased. What appears to be happening is that when the value of box 2 is either blank or non-negative, TT takes the net loss of the passthrough entity and effectively allows it to be aggregated with the net positive income from the other K-1, resulting in a decreased credit to the taxpayer. So each auxiliary K-1 having a net loss and with box 2 being blank or 0, causes a decrease in the tax credit. In my case, I was able to switch the order of entry of the various passthrough entities, so the largest one was either included in the first K-1 vs in an auxiliary K-1, and the tax due would fluctuate accordingly – which seems to prove a bug is present.

WORKAROUND: By experimentation, I have found that putting a value of -1 (a loss of $1) in the box 2 for each of the additional TT K-1 schedules seems to solve the problem without substantively changing the tax outcome from what it should be.

Can someone please reproduce this issue and either explain or fix?

[LenaH]

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)

 @alexonski 

[alexonski]

Requested token number is: 116291628-78593838

[alexonski]

I provided the diagnostic file you requested over two weeks ago.  Do you have an update?

@LenaH 

[AnnetteB6]

After taking a closer look at your diagnostic file, there is not an error in TurboTax that needs to be corrected.  Instead, the issue is with the way the data has been entered into the program.  

In order to keep all of the QBI losses from rentals together and associated with the K-1 reporting rental income (loss), you should add all of the amounts together and report them with a single box 20 code Z entry.  

That means that you will only have two K-1s in your return (instead of four) - one for the partnership reporting income in box 1 and one for the other partnership reporting income (loss) in box 2.  Doing it this way, all of the 'numbers' stay together and losses are reported against the proper category of income.  

By including the -1 as a loss in box 2 of the supplemental K-1s that you entered, you were actually tying the QBI losses together as if they had all been added together in a single entry.  But, to make your return more accurate without the -1 in each of the supplemental K-1s, you can add all the box 20 code Z entries together on the single K-1 showing the loss in box 2. 

@alexonski 

[alexonski]

@AnnetteB6

You suggest above that "In order to keep all of the QBI losses from rentals together and associated with the K-1 reporting rental income (loss), you should add all of the amounts together and report them with a single box 20 code Z entry." This sounds great, but what entity name and EIN should I use for the aggregated amounts for the 2 or more passthrough entities?

Just picking one PTE name doesn't seem right, so I would think that I should enter in "various" for both the passthrough entity name as well as the EIN. Also, I would think that I should be checking the "aggregated" box on form 1065 (Schedule K-1) section D1. In reviewing the IRS instructions for form m1065, however, it looks like once you aggregate in a first year for a K-1, you need to continue aggregating in future years for that K-1.

Here is a screenshot (with fictitious numbers) for my section D1 after doing this. Does it look right to you?

On a related topic (and this is a more obscure issue), I do not think you are correct in saying "By including the -1 as a loss in box 2 of the supplemental K-1s that you entered, you were actually tying the QBI losses together as if they had all been added together in a single entry." The various K-1's do not get aggregated and stay separate as they get propagated to form 8995 (their ultimate destination).  Rather, what including the -1 in box 2 does is prevent the LOSS from each separate K-1's PTE being propagated to form 8995 after the calculations that are performed in Section D2 of form 1065 are done.  Instead, the allowable QBI gets shown on the 8995 form as 0 rather than a negative number.

In particular, if box 2 of a particular K-1 is 0 (not negative), and the PTE income is negative (a loss), then line E4a of Section D2 adopts the PTE loss, which in turn then gets propagated to line E10 as a (negative) allowable QBI for this business. The now negative "allowable QBI", in turn then gets propagated to form 8995 where it improperly gets aggregated with other allowable QBI and can offset positive QBI from a completely unrelated business (e.g. non-passive income for the spouse), reducing the effective QBI tax credit of the spouse's non-passive QBI.

The "About" box for line E4a (obtained by a right click) of Section D2 of the form 1065 explains this as follows: "Allowable Qualified Business Income (QBI): The starting point of allowable QBI is the income reported in Section D1. ... If there are no losses for this business subject to at-risk or passive loss limits, then line E3 (QBI) will transfer to line E4 (allowed QBI)." If box 2 is not negative, then "there are no losses for this business" and so the negative QBI gets propagated as allowable QBI, which then can get combined with unrelated positive QBI from another K-1 (possibly improperly commingling active and passive QBI for the QBI deduction on form 8995).