hillelw
Returning Member

Business & farm

Don't do it! I was going in circles too, but eventually figured it out - at least in my case - and it may appropriate be your case too.

 

I checked my 1099-DIV and found entries for 199A dividends, and they added up to amount on which the 20 percent credit was calculated. (Surprise!)

 

These 199A dividends are tracked by the companies you own stock in and then by the mutual fund and eventually your broker, etc. -- and what they provide to you on your 1099-DIV can be relied upon IMHO. In June 2020, the IRS issued final regulations allowing Regulated Investment Companies (RICs, aka mutual funds) that own interests in publicly traded partnerships or real estate investment trusts to "pay dividends that a shareholder in the RIC may treat in the same manner (or a similar manner) as the shareholder would treat the underlying item of income or gain if the shareholder realized it directly. " Fair is fair!  (See the Federal Register of June 25, 2020.) (Note: similar proposed regulations issued for earlier years may also be relied on.)

 

In my case the 199A dividends were paid by large-cap companies in a Fortune 500 index fund. I don't know which Fortune 500 companies pay 199A dividends, but in general you would be surprised how large pass-through entities can get.

 

You are paying tax on these dividends, so you might as well take the credit you are entitled to.

 

It would be good if TT and the brokerages made it easier to figure this out. I imported my 1099-DIV from the brokerage directly into TT and it was not flagged in any way. You can click around in vain on TT's "Qualified Business Income Deduction Summary" trying to determine the source of the income and connect it to the concept of 199A. There should be a link back to the relevant 1099-DIVs as-imported and -displayed in TT, but there isn't. If you know to look for 199A income you will notice an explanation attached to box 5, but neither TT's form 8995A nor the QBI Deduction Summary mention 199A.

 

Finally, TT's forms transfer information from the 1099-DIVs as if the source was a REIT, when all my 1099-DIV says is "Sec. 199A," with out distinction as to source (as between a REIT or a PTP).