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qexyn
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S-Corp K-1 distribution tax seems incorrect

I have a K-1 from my S-Corp which I filed in TurboTax online, and it also qualifies for the QBID (20% reduction). However, once I added the K-1, the amount of tax liability it added is much higher than I calculated. It should be (distribution_amount * 0.8 * 0.22) because the income is in the 22% federal tax bracket for me. However, the resulting tax liability is several thousand dollars higher than that calculation.

 

Comparing the tax numbers before/after adding the K-1, TurboTax online shows me an income tax breakdown that includes a significant negative (loss) amount on my Schedule E. However, after adding the K-1, that loss disappears and my K-1 distribution amount shows there in full. In other words, it seems that the loss is completely ignored after adding the K-1. It seems that simply adding my K-1 distribution should not eliminate the loss that was previously being accounted for, and if anything the loss should just be applied against my distribution in order to offset it by as much.

 

Is there a reason for this? It does actually seem to be taking into account the 20% reduction for QBID.. the problem is that it is no longer allowing me to use a significant loss that was on my Schedule E.

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1 Reply

S-Corp K-1 distribution tax seems incorrect

The qbi dediction is not figured the way you're doing it. look a form 8995 or 8995A for the computation.

 

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