"Should go on Beneficiaries 1040 Schedule A line 16"
At this point in time, the IRS is taking the position that excess deductions on the termination of estates are miscellaneous itemized deductions and not deductible.
See https://www.irs.gov/publications/p529#en_US_2018_publink10004383
I'm having the same issue. I tried it in another software and it wasn't putting the excess deductions on line 16 of schedule A like this IRS Instruction says it should (see page 2): <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1041sk1.pdf">https://www.irs.gov/pub/irs-pdf/i1041sk1.pdf</a> - I then decided to try TruboTax Premier online hoping they'd get it right but so far they haven't. The IRS instruction for this wasn't published until February 5th of this year so it may have been too late to code the software for this change. Can Line 16 of Schedule A be over-ridden when using the online version?
Line 16 cannot be overriden with the Online version, only the desktop (CD/Download) versions.
Also, the IRS instructions in the link you posted (for Sch K-1 (1041)) conflict with the IRS instructions for Line 16, Sch A. I can refer you to the link below to IRS Notice 2018-61 and will tell you that future deductibility doesn't look good considering the language at the bottom of page 7 to the top of page 8.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/n-18-61.pdf">https://www.irs.gov/pub/irs-drop/n-18-61.pdf</a>
Well that does conflict but they did request comments on that and the relatively new i1041sk1 (Feb 5, 2019), seems pretty clear on what they decided wrt Excess deductions. I'm going to take the deduction when I file. It's pretty significant in my case. Maybe I'll do it by selecting one of the acceptable deductions for line 16 and if the IRS questions me, I'll clarify it later (or I'll just file by mail).
"Should go on Beneficiaries 1040 Schedule A line 16"
At this point in time, the IRS is taking the position that excess deductions on the termination of estates are miscellaneous itemized deductions and not deductible.
See https://www.irs.gov/publications/p529#en_US_2018_publink10004383
They are deductible. See page 2 of the instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i1041sk1.pdf">https://www.irs.gov/pub/irs-pdf/i1041sk1.pdf</a>
Thanks for all the answers . See link in 1st Paragraph under Whats new on https://www.irs.gov/pub/irs-pdf/i1041sk1.pdf Not sure why IRS then says they are allowed on later in this Pub? Looks like we are waiting on new regulations to be published? I suspect thats why Turbo Tax wont put these on Line 16 Sch A? Hope they update software ASAP when these regs allow these deductions.
I suspect it is because the IRS instructions specifically limit the expenses on Line 16 to only those listed.
Paragraph 1 refers to "Miscellaneous" Deductions which have been suspended. Box 11, Code A are "Excess" Deductions so it's not really a conflict. There's a comment letter to the IRS/Treasury from AICPA that explains how this all came about (<a rel="nofollow" target="_blank" href="https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/20181031-comment-letter-on-notice-2018-61.pdf">https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/20181031-comment-letter-on-notice-2018-61.pdf</a>). It seems the only place available for a beneficiary to take this deduction was under Miscellaneous Deductions. When that got suspended, the ability to take the excess deduction inadvertently got swept away with it. The updated instruction took the recommendation of the AICPA and fixed the problem. Now we have to wait for the various tax software providers to catch up (or let us override line 16 without losing the ability to efile.
@Geobrick thank you for doing the research to help people like myself who are in this situation. I have found all the links from this discussion and similar ones, and it does appear as you said that the AICPA's recommendations were adopted by the IRS... which makes it all the more puzzling why Intuit can't fix this within the timeframe to allow this entry and still support efiling. Looks as though I will be mailing my return this year... :(
@GAW61 FYI, I found another link from last summer that summarizes Notice-2018-61 but pre-dates AICPA's comments and recommendations. (<a rel="nofollow" target="_blank" href="https://www.wealthmanagement.com/estate-planning/irs-announces-forthcoming-section-67g-clarifications">https://www.wealthmanagement.com/estate-planning/irs-announces-forthcoming-section-67g-clarifications</a>) I'm posting it here because it clarifies from the notice that "Section 67(e) Expenses Aren’t Miscellaneous Itemized Deductions". It also references the request by IRS for comments regarding beneficiaries that were addressed by AICPA.
I can’t find the final regulations that were promised perhaps that’s why TurboTax has not updated their software?
I don't believe any regs have been promulgated so deductibility continues to be arguable.
Perhaps... Still, the instructions that you previously referenced do provide for deduction of beneficiary’s share of the excess deductions on termination, as stated for Box 11 Code A. (<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1041sk1">https://www.irs.gov/instructions/i1041sk1</a>)
Correct, but the instructions for Schedule A, Line 16 do not.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1040sca#idm140545382987696">https://www.irs.gov/instructions/i1040sca#idm140545382987696</a>
True; however, if you scroll to the bottom of the page you will see the following: "Page Last Reviewed or Updated: 28-Dec-2018". Do the same for the Instructions for Schedule K-1 (Form 1041) web page (<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1041sk1">https://www.irs.gov/instructions/i1041sk1</a>) and you get this: "Page Last Reviewed or Updated: 06-Mar-2019".
Would it be helpful if the IRS were to go back and update the Schedule A instructions to reflect this new information? Absolutely... and why they haven't yet is a mystery at best.
We can go back and forth about this into perpetuity. I'm just going to add the following, which should be obvious.
If you take the deduction, you take your chances. More likely than not, an issue will not be raised by the IRS (i.e., the deduction will either slip through unnoticed or they will accept the deduction as valid).
If, however, the deduction is challenged, then your only recourse would be to (a) pay the assessment (including any interest/penalty) or (b) proceed through the appeals process and, if unsuccessful, proceed to court. Option b is completely ridiculous considering the appeals process would involve more time/money than the deduction is worth.
I don't think there's any doubt that the excess deductions are allowable. The i1041sk1 instruction is very clear on this. The Schedule A instruction only says "Miscellaneous" deductions are not allowed and excess deductions are not miscellaneous deductions. I agree with your assessment of how the IRS might react (the IRS will do what it's going to do) but if they do challenge it, I'd think a simple letter highlighting the i1041sk1 instruction will clarify things.
Hopefully, that will happen. However, they can always return fire by citing the Schedule A instructions for Line 16.
Is there anyway to get an answer from TurboTax as towhy there software will not properly account for this?
It is almost certainly this......from the instructions for Schedule A:
Only the expenses listed next can be deducted on line 16. For more information about each of these expenses, see Pub. 529.
Gambling losses (gambling losses include, but aren't limited to, the cost of non-winning bingo, lottery, and raffle tickets), but only to the extent of gambling winnings reported on Schedule 1 (Form 1040), line 21.
Casualty and theft losses of income-producing property from Form 4684, lines 32 and 38b, or Form 4797, line 18a.
Loss from other activities from Schedule K-1 (Form 1065-B), box 2.
Federal estate tax on income in respect of a decedent.
A deduction for amortizable bond premium (for example, a deduction allowed for a bond premium carryforward or a deduction for amortizable bond premium on bonds acquired before October 23, 1986).
An ordinary loss attributable to a contingent payment debt instrument or an inflation-indexed debt instrument (for example, a Treasury Inflation-Protected Security).
Deduction for repayment of amounts under a claim of right if over $3,000. See Pub. 525 for details.
Certain unrecovered investment in a pension.
Impairment-related work expenses of a disabled person.
If in fact irs is allowing this deduction we need to find out what TurboTax plans to do so we can complete our returns
@GAW61 if you haven't paid yet, see my reply to @sgove6 to a similar question in this TurboTax Community. (Basically I said I found a tax program, with the initials TS, that's handling the K1 box 11A deduction in accordance with the i1041sk1 instruction). In my case, I already paid for a desktop version of TaxAct so I'm not sure what I'm going to do. I can e-file by putting the 11A amount in box 10 instead (box 10 is for estate tax) and add an e-file note explaining what I did (then hope the IRS accepts it as is), or I can paper file (and would have to do that for my state taxes too) or I can pay more to e-file using TS online. I already filed four 1040 returns using TaxAct *where the 11A issue wasn't applicable) so I just about got my money's worth out of it. The problem I'd have going TS in the future is they don't make a version for Estates and Trusts yet (and I have 2 other Trusts I manage). I've used TurboTax for many years but I had an issue in 2016 so I switched to TaxAct which has had its own issues (including the one we're writing about here). I think most people would have just gone through the Q&A, clicked "eFile" and be done with their taxes. They'd never know they missed a valuable deduction.