I have a small online business and have a loss on it this year of under 3000 (including previous year carryover). My husbands dad passed away leaving us a trust spread over 10 years for which we received a K1 for. the partnerships the dad was invested in.
Before I knew of this K1 we were receiving a refund but I hadn't filed yet. After I input the K1 it reduced my refund considerable..Of course I checked it out & I noticed that my business was applied against the K! - like the software considered it the same?
Is this supposed to happen? Since it is a 10 year trust this will happen every year until it's closed out? Thank you for the assistance!
If the Schedule K-1 is reporting Income, it will be applied to any other income (or loss) on your return, so could very well increase your taxable income and reduce your refund.
Depending on what type of income is being reported on the K-1 (rental? business?) the amounts may vary over the years, but yes, you should be prepared to have your total income increase each year.
Click this link for more info on Schedule K-1 for Trusts and Estates.
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It is estate income from my father in law who passed away in 2019. He used partnership or pass through companies to invest in. They were all liquidated after he passed away and we were hit with 15k income (with Dividends & Capital Gains too) thru Schedule K1. My personal business loss was applied toward that causing us to lose a large part of our refund. Thanks!