Schedule K-1 Statement A Multiple Businesses & QBI Qualification

[james120]

Hi,

I'm using TurboTax desktop. How do I report Schedule K-1, Form 1041 Statement A (Section 199A) ordinary business income if my Statement A has more than one business listed as paying ordinary business income? The TurboTax form only provides me with the option to attribute the income to one business/employer ID. For example, Entity Y reported some amount of income for me, and Entity Z reported their own amount of income for me. They're both reported on the same Statement A of the K-1. However, I can't specify more than one business as the income source, and if I add the amounts together but only attribute them to one of the businesses, I'm worried I'll be misreporting. Any advice here would be appreciated.

Separately, I'm not familiar with QBI and I think this is the first time it may apply to me. Seeing the number entered for ordinary business income on this K-1 change the amount of my return is making me a little wary. I feel confident I'm reporting the information accurately per my K-1, so if my K-1 is accurate then I think I'm doing this right. Is there anything else I should check to be sure I don't misreport this?

Thanks very much for your help.

[DavidS127 · Accepted solution]

The Qualified Business Income deduction is new starting in 2018, but in most cases provides a "20% of income" deduction from your taxable income for qualified business and estate/trust income.

Multiple Qualified Business Income (QBI) entities reported on a single K-1 require that a separate K-1 be entered for each entity reporting QBI (Section 199A amounts).  For each K-1, the Section 199A amounts associated with your box 14 code I (India) are entered on the "We need some information about your 199A income or loss" and "Let's check for some uncommon adjustments" screens that follow (several screens after) the last "box" screen.

Because your K-1 is reporting Section 199A information generated by the estate/trust and Section 199A information generated by at least one additional "passthrough" entity, you'll need to "split" this K-1 into separate K-1s for entry into TurboTax.  Enter one K-1 with only the "box" amounts generated by the "main" estate/trust, and an additional K-1(s) with only the "box" amounts generated by each separate passthrough entity. 

During the first part of the K-1 entry, all the separate K-1s use the name, address, and EIN of the "main" estate/trust shown in Part I and Part II of the K-1 you actually received.  

The boxes 1-14 on the K-1 you received are the combined totals of the main estate/trust and the passthrough entity.  You must figure out how much of each box 1-14 is for the main estate/trust versus each passthrough entity, and that is the "split" you use to enter the box 1-14 on the separate K-1s.  The total each numbered box for your separate K-1 forms must equal the total for that box on the K-1 you actually received.  For example, all box 1 amounts on the separate K-1s should add up to the box 1 amount for the actual K-1 you received.  If you can't figure (deduce) that "split" from the information you have, you will need to contact the preparer of the K-1 to get those amounts. 

The Section 199A Statement you received for box 14 code I should already "split" the Section 199A amounts between the entities, so you enter the Section 199A amounts for each entity on the K-1 you've created for that entity.

Note that when you enter each K-1, you'll encounter the question "Does the Section 199A income (from box 14) include business income from a business held by the trust or estate?".  When you answer Yes, TurboTax will ask for the name and EIN of each pass-through entity.

After this, you'll get the "We need some information about your 199A income or loss" and "Let's check for some uncommon adjustments" screens to enter the amounts from the Section 199A Statement that came with your K-1.

[james120]

Excellent & timely response - sorry for my delayed reply, I didn't see this come through. You've already been so helpful but if you have time I have one follow-up question to make sure I understand.

The main estate/trust reporting my K-1 reports information directly related to them only on the first page of the Schedule K-1 (Form 1041). Specifically, it has reported information in boxes 1, 5, 7, and 14 (codes E & H).

On my K-1, Code I (India) in box 14 and the accompanying Statement A (199A) report information only from 2 pass-through entities. The main trust/estate did not report any of its own information here.

Am I correct in thinking that what I should do is file one K-1 for the main estate/trust with information in boxes 1, 5, 7 and 14 (codes E & H) and two separate K-1's where I leave blank 1, 5, 7 and 14 (codes E & H) and report only the information in box 14 code I and accompanying entity-specific information from Statement A (199A)?

Thanks again, I appreciate it.

[DavidS127]

No, you must deduce the "split" of those box 1, 5, 7, and 14 amounts between the main entity and the passthroughs.

So, take a look at the Section 199A information reported for the passthrough entities, and compare that to the box 1, 5, and 7 amounts reported on the actual K-1.  If the Section 199A for the passthrough entities is, say, $50 each of rental income for $100 of total "rental income" from both passthrough entities, and the box 7 net rental real estate income $100, then all the box 7 $100 goes on the passthrough entities' box 7 ($50 each) and none goes on the "main entity" K-1. 

If the passthroughs report Section 199A ordinary income, you'll have to similarly "deduce" in which boxes that should be reported (box 1, box 5), and leave the "balance" on the "main entity K-1" box 1, box 5.

Box 14 is for investment income, and once you figure out the box 1 and box 5 you can hopefully deduce how much belongs on each passthrough K-1, with any "balance" on the "main entity K-1.

When you are finished, the box 1 for all three K-1s you entered should equal the box 1 amount on the actual K-1, and so forth.

If you can't determine the split for the information you have, you will need to contact the preparer of the K-1.

[james120]

Great answer, thank you very much, I would have done it wrong. The only item I'm uncertain about now is box 14:

On my 199A there is only income reported for the two pass-through entities, nothing for the main entity whatsoever (it's not listed). Moreover, the two pass-through entities only reported in the Ordinary business income (loss) field. I believe this Ordinary business income (loss) for both entities pertains to box 5. As such, I've completed the allocation process for box 5 between the 3 entities as you described.

However, I wasn't sure what to do with box 14 in that case. The K-1 I received has code E, H, and I. It seems that E & H pertain only to the main entity, so I expect I'll only report those codes on the K-1 I file for the main entity. But how should I handle code I (India)?

1. Should I report code I only on the two pass-through entity K-1's, omitting it from my K-1 for the main entity? This seems correct, since there is no 199A information to report for the main entity. In this case the Ordinary business income (loss) I file on the "We need some more information about your 199A income..." screen I encounter later in TurboTax would be the same as what I reported in box 5 per entity. OR
2. Should I report code I (India) on all of the K-1's I file, for the two pass-through entities AND the main entity? This seems wrong because the K-1 reports no information on 199A relating to the main entity, so I don't know what I would enter on the following TurboTax screens when it asks for more 199A information related to the main entity.

Thanks again, very much appreciate your help.

[DavidS127]

Number 1 describes the correct way to report your box 14 code I.

[james120]

Hi DavidS127 - I just wanted to say thank you very much again for all of your help. I filed my taxes this morning and then donated $30 (which ended up being a 2x matching gift, so $60 benefit) to my local area food bank on your behalf.

Have a great tax filing day!

[lvaldich]

@DavidS127, thanks for the extremely helpful posts regarding how to report in TurboTax multiple QBI pass-through entities associated with a single K-1. As follow up, a few questions please:

(1) The 199A Information Section shows some items as a single category that in the K-1 span multiple boxes/ subcategories; how should I allocate them/where should I include them? Specifically:

(a) Other Income (Loss) (Boxes 11A-11I)

(b) Other Deductions (Boxes 13A-13W)   

(2) In the 199A Section there are some amounts under an item labeled SECTION 199A DIVIDENDS doesn't seem to be the same as Box 6 Dividends. Do you agree and if so where should I account for these?

(3) Some QBI entities don't show an EIN and don't appear to be foreign; what should I indicate in the EIN field?

(4) Finally the 199A Information section shows amounts under a few categories that don't seem to be part of the front/summary section of the K-1 that are related to QBI which include "QBI", "W-2 WAGES", and UBIA OF QUALIFIED PROPERTY (Unadjusted Basis in Qualified Property immediately After Acquisition)

(a) What am I supposed to do with them? 

[pojofo]

Hello.  Regarding this topic, I would like to clarify some items:

For boxes other than 1-14, are those just entered with the K-1 for the parent organization?  And these are left blank on all of the pass-through organizations?

And for the initial K-1 entry of the parent organization, the boxes 1-14 have deductions made for the pass-through entities values...in other words, you don't put the values from your k-1 form directly into the first one entered in turbo tax?  You have to deduct all the individual amounts from the pass-through entities?

Thanks

[pojofo]

One more question: It would appear that a separate K-1 for the parent LLC is NOT necessary?  Each time you would just enter information for one of the pass-through entities?  But the first time through, where you are prompted to enter a pass-through, you would have all of the boxes filled for the main entity values...and with each subsequent pass-through these values would not be entered?

Why does turbotax make this so difficult?!  Why not just have the ability to enter each pass-through at the same time?!