Solved: My husband was issued a K-1, so I entered the appropriate ordinary business income, but he also has unreimbursed business expenses that I am not sure where those go.
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My husband was issued a K-1, so I entered the appropriate ordinary business income, but he also has unreimbursed business expenses that I am not sure where those go.

 
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My husband was issued a K-1, so I entered the appropriate ordinary business income, but he also has unreimbursed business expenses that I am not sure where those go.

It depends on what type of Schedule K-1 he received.

If Schedule K-1 came from Form 1065, and you were required to pay these expenses under the partnership agreement, you may report the expenses on Schedule E (Partnership Income) as "Unreimbursed Partnership Expenses" (UPE). In this case, TurboTax will ask you about UPE (see screenshot below - click to enlarge), with follow-up entry at the end of the Schedule K-1 input.

But if the partnership agreement specifically states that the partnership has a non-reimbursement policy when expenses are incurred outside of the partnership or that it does not specifically require partners to pay for certain expenses, the deduction may be disallowed at the partner level. 

See instructions for Form 1040, Schedule E for more info from the IRS.

If Schedule K-1 came from Form 1120S, be advised that S corporation shareholders generally cannot deduct unreimbursed business expenses on Schedule E because the shareholders are categorized as employees when performing services for the corporation (and a corporate officer may be considered a statutory employee). These expenses, if not subject to reimbursement from the corporation, are unreimbursed employee business expenses treated as miscellaneous itemized deductions subject to the 2% of the adjusted gross income (AGI) floor. In this case, enter the expenses under Deductions & Credits >> Employment Expenses >> Job-Related Expenses.

For more from the IRS, see: S Corporation Employees, Sharholders and Corporate Officers

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Level 7

My husband was issued a K-1, so I entered the appropriate ordinary business income, but he also has unreimbursed business expenses that I am not sure where those go.

It depends on what type of Schedule K-1 he received.

If Schedule K-1 came from Form 1065, and you were required to pay these expenses under the partnership agreement, you may report the expenses on Schedule E (Partnership Income) as "Unreimbursed Partnership Expenses" (UPE). In this case, TurboTax will ask you about UPE (see screenshot below - click to enlarge), with follow-up entry at the end of the Schedule K-1 input.

But if the partnership agreement specifically states that the partnership has a non-reimbursement policy when expenses are incurred outside of the partnership or that it does not specifically require partners to pay for certain expenses, the deduction may be disallowed at the partner level. 

See instructions for Form 1040, Schedule E for more info from the IRS.

If Schedule K-1 came from Form 1120S, be advised that S corporation shareholders generally cannot deduct unreimbursed business expenses on Schedule E because the shareholders are categorized as employees when performing services for the corporation (and a corporate officer may be considered a statutory employee). These expenses, if not subject to reimbursement from the corporation, are unreimbursed employee business expenses treated as miscellaneous itemized deductions subject to the 2% of the adjusted gross income (AGI) floor. In this case, enter the expenses under Deductions & Credits >> Employment Expenses >> Job-Related Expenses.

For more from the IRS, see: S Corporation Employees, Sharholders and Corporate Officers

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