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santo
New Member

Why the software did not calculate 20% business income deduction from my K-1

I am using turbo tax home & business software & reported via a K-1 my small business income. 

Question: why did not the software automatically calculate the 20% deduction on the income.  I had to learn via other customers that you needed to check the # 20 box for the software to calculate.   I did not see that instruction anywhere.

Where did I go wrong in entering K-1 sm. business income or does your software have a problem?

1 Best answer

Accepted Solutions
DanielV01
Expert Alumni

Why the software did not calculate 20% business income deduction from my K-1

It depends. For starters, the QBI calculation is complex, especially if the individual is above the 157,500 thresholds if single, married filing separately, or head of household or 315,000 if Married Filing Joint.  Because of the complexity of the calculation, QBI cannot calculate automatically; more information is needed to verify you qualify for the deduction.  But these are the steps needed to help the program calculate QBI correctly:

  1. Under Wages and Income, scroll down to the Subheading Business Income, and select K-1 (Partnership) .  
  2. On the screen Choose Type of Activity select whether it is Business Income or Rental Real Estate, (if business income, answer questions regarding your stock ownership and Material Participation, if rental real estate, answer the appropriate questions about being a Real Estate Professional, Active Participation, and Special Handling.)  It is also important that the income amounts themselves be reported in Box 1 or Box 2, depending on if it is Business Income or Rental Income.
  3. On the screen Check Boxes That Have an Amount, you should select Box 20 info.
  4. You should see codes Z, AA and perhaps AB and AC on the K-1 (if you do not see any of these codes, this would be one reason why the QBI does not calculate.  This information must be entered from the information on the K-1 for QBI to calculate).
  5. Select any that apply on the screen Other Situations, and any information to the question Did this business receive qualified payments from a cooperative.
  6. Answer the question about anticipated income on the next screen, We're almost done.  If anticipated income is below the threshold, QBI will calculate after that screen.  If above, you will provide additional information, and QBI will calculate according to the final results of the calculations.

You may find the following FAQ helpful:  https://ttlc.intuit.com/replies/7036528

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**Mark the post that answers your question by clicking on "Mark as Best Answer"

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1 Reply
DanielV01
Expert Alumni

Why the software did not calculate 20% business income deduction from my K-1

It depends. For starters, the QBI calculation is complex, especially if the individual is above the 157,500 thresholds if single, married filing separately, or head of household or 315,000 if Married Filing Joint.  Because of the complexity of the calculation, QBI cannot calculate automatically; more information is needed to verify you qualify for the deduction.  But these are the steps needed to help the program calculate QBI correctly:

  1. Under Wages and Income, scroll down to the Subheading Business Income, and select K-1 (Partnership) .  
  2. On the screen Choose Type of Activity select whether it is Business Income or Rental Real Estate, (if business income, answer questions regarding your stock ownership and Material Participation, if rental real estate, answer the appropriate questions about being a Real Estate Professional, Active Participation, and Special Handling.)  It is also important that the income amounts themselves be reported in Box 1 or Box 2, depending on if it is Business Income or Rental Income.
  3. On the screen Check Boxes That Have an Amount, you should select Box 20 info.
  4. You should see codes Z, AA and perhaps AB and AC on the K-1 (if you do not see any of these codes, this would be one reason why the QBI does not calculate.  This information must be entered from the information on the K-1 for QBI to calculate).
  5. Select any that apply on the screen Other Situations, and any information to the question Did this business receive qualified payments from a cooperative.
  6. Answer the question about anticipated income on the next screen, We're almost done.  If anticipated income is below the threshold, QBI will calculate after that screen.  If above, you will provide additional information, and QBI will calculate according to the final results of the calculations.

You may find the following FAQ helpful:  https://ttlc.intuit.com/replies/7036528

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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