QBI Passive Op Loss Must be entered

[ajay1900]

@gmangesh , or @paulhart 

there's another question in TT:

"Do you want to use a safe harbor to quality this property for a deduction"

Do you select "I elect to use" or "None of these apply"?

thanks!

[jackinthebox]

@DianeW777 I have different view from yours.

The line 10 shows the 'deduction' from QBI. That further reduces the income even when there are other losses exceeding the income. If I am reading the forms right, that amount is calculated as a percent of total Gross Income (before losses are subtracted) so that amount will always be positive number or 0. 

That is also supported by fact that

1) I had disallowed losses carried over in 2019 return and still leftovers for 2020. 

2) This field is on worksheet for individual property (if you have more than 1) while line 10 on 1040 is for all  aggregated properties.

I hope I am wrong, but that's what I gathered. 

BTW, I just spent 3 hours on phone with 2 different Turbotax experts and they couldn't figure it out either.

[47acre94]

Hello DSOVa,

I believe I am in the same situation as you, with pass-through-partnership K-1. When doing the Federal Review, it flagged a missing 2019 entry. I wish I could paste a snippet in this text box to explain, but this forum will not allow, so I'll try to describe with text.  It is pointing to the TT K-1 form and at the bottom of it there is a table for Carryovers and a comparison of Regular Tax and QBI in 2 separate columns.  For years prior to 2018, it lists the Regualar losses and for QBI shows zero, because as I read somewhere this whole QBI thing only applies to 2018 and future years. It appears to have mistakenly placed the 2019 Operating Loss for Regular Tax (from row G) into the 2018 Operating Loss for QBI (row D), and is duplicated. I believe this is erroneous. I believe the 2018 operating loss for Regular Tax - in the case of a PTP - should be the same as the 2018 operating loss for QBI. So the 2 numbers in row D should be the same and I believe the 2 numbers in row G should be the same. In other words, I believe the QBI losses for a PTP should be the same as the Regular Tax losses. I'm going to try to speak with someone from their team tomorrow. I was curious if you ever figured this out?  Thanks, 

[LJane29]

Hi, I am a TurboTax employee (not sure why it's not showing on my name) and a tax expert.

Please note that the issue presented itself if you did an early transfer of your tax file.  The "fix" only works if you re-import the tax file (then the information will transfer).

To find the numbers needed:

In your 2019 tax return (your copy, not what is sent to the IRS) there is a Schedule E Wks (Schedule C for business income).  If you are looking at the form on screen you will scroll to the lower part of the worksheet/Schedule and see 2 "Smart Worksheets" that have the numbers you are looking for.

"Carryforward to 2020 Smart Worksheet" has 3 columns (Regular Tax, QBI, and Alternative Minimum Tax) and this is where you pick up the losses for the prior years

"Passive Limits" (all the way at the bottom) shows your operating losses for regular tax and QBI

If you are looking at a PDF or printed copy, these smart worksheets print as separate pages.

If your business or rental has operated at a profit for the last few years then you can enter "0" for these boxes.

The Qualified Business Income deduction requires that you take into account any prior losses before calculating the current year QBI deduction.

[luke622]

Consider me slow, but I have no idea what you just said. What is "an early transfer of your tax file.  The "fix" only works if you re-import the tax file (then the information will transfer)." I'm not aware of ever transferring any tax file, or importing any tax file, or re-importing any tax file. What does that mean? I simply enter the data into the boxes that the TT program generates.

Also, you say there are three columns that have the "numbers you need." I think we are only wanting ONE number here - the one for QBI passive op loss. Which one is that? That wasn't one of your options?

[LJane29]

If you were a prior year turbotax user then these numbers would have automatically been populated when you transfered your prior year return (for an on-line user this happens automatically).

The 2 different worksheets noted have different columns.  One has 3 columns (regular tax, QBI, Alternative minimum tax) and one has 2 columns (regular tax and QBI).  If you did not prepare your prior year return using TurboTax then I'm not sure where these numbers would be reflected.

[luke622]

I've been using TT for 25 years, but I guess nothing "transferred." 

I did see a worksheet that had the columns you mentioned. My question though, is which of those columns do I want a number from? Which one shows the QBI Passive op loss?

[jackinthebox]

Let me try to explain (steps for me for my rental properties Schedule E)

Advance warning - make sure  you match section titles and years exactly. There are other sections with similar name and for previous years in worksheet, so don't get wrong numbers/years.

1) If you are able to restart from stratch  for 2020 taxes i.e. ditch current file, update your Turbotax 2020 and import 2019 files and re enter your current year data. Then you will not face this issue.

2) If your taxes are complex and you would rather not spend that much time, then 

a) Open last year's tax file  in turbotax 2019 (last year software). Swith to form mode. Go to Schedule E (if you have multiple then you have to do it multiple times). Scroll until you reach a section called "Carryforward to 2020 Smart worksheet". Under that there will be a section called "Passive Loss Carryover".  Copy three numbers in three columns from line G (now onwardsreferred as DataElements A). Then scroll again until you reach very bottom to section "Passive Loss Carryforwards to 2020 by year and category". Copy all numbers. (now onwards referred as DataElements B). I took screenshots to make it easier to keep track.

b)  Open turbotax 2020, Go to your rental property page. Click 'Edit'. Click 'update' next to 'Property Profile' . Continue Until you reach a screen asking 'Do Any of these situations apply to this property'. Select checkbox under 'Carryover->I have passive activity real estate loses carried over from prior year'.  Click continue. On new screen enter DataElements A from previous step (order of fields is wonky so make sure you get right number in right field). Click next. Depending on numbers you entered you might get a new screen with title "Enter info about passive losses". If you do, then you will see sections titled "Regular tax" and "QBI Deduction" for year 2018 and 2019. Copy numbers from DataElements B. The screen already has a total under years 2018 and 2019 giving wrong impression that it is total of year 2018 and 2019. However, that has loss carried over from earlier years too. So ignore the total amount and just enter data from DataElements B.

Now even after doing all that step, 'smart' check may still show errors in this area and drop you in forms mode and ask  you to enter some missing data. In that case again refer to your DataElements A and DataElements B and fill appropriate field.

Repeat above steps if you have other schedule E's. Hope this helps.

Disclaimer: I am not a tax expert, so take above information at your own risk or consult a tax professional. 🙂 

And you are welcome!

[luke622]

Thank you for a most thorough response! I think a problem I have is that I am not able to go into a "forms mode." I'm using the online version of TT Premier, and it doesn't seem like this is an option?

[LJane29]

The program should be taking you to the fields that need the information so you don't need to go to "forms mode" on the on-line product for the 2020 tax return.  If you filed your 2019 tax return with TurboTax you should have a copy on your "main page" where you would access your prior year return.  This PDF copy of your return will have the information but you may need to hunt a little more for it.  The worksheets these are on are separate from the Sch E worksheet so you will need to scroll thru your PDF to find the worksheets.

Hope this helps, and remember, if you didn't have a loss then you can put in "0" for these values.

[rockmama]

Thank you Thank you SRH3!  This was making me nuts as well - couldn't find any info.  I have had this rental for 10+ years and have never been asked this by TT.  First time I've seen a bug - thankful this comment was posted.  Thanks to your tip, I entered in the 2019 field and it deleted the 2018 field.  Thank you - made my day.  

[Cincolo]

Exact same thing happened with mine (put a figure in for 2018 when there shouldn't have been anything).  Thanks for the simple solution!

[Waterl]

Just so everyone is aware: I 'imported' my 2019 tax file on 6/8/2021 (software completely updated) - and it still had this problem; so don't waste your time starting from scratch.

[Pazzy]

Wow! It's October 15th 2021 and I am using TurboTax Live (highest and best version). I am having the same problem. The software is always up to date because it's online and I only recently (in the last two weeks) cleared out all my data and started with a fresh import of my 2019 file. It has not been a good experience at all. I have had multiple issues and TT Live won't even let me save my tax file to my PC. 

Anyway, I am having the same issue and even after looking up the values on my 2019 return (I searched and found forms 8995 and 8582 - Passive Activity Loss Limitations) I cannot seem to make this work as TT keeps telling me that my passive loss amounts cannot be larger than the total loss. But I am getting the passive loss amounts from my actual 2019 forms and using the Unhallowed Loss column.

This is not only very confusing, but it's becoming nonsensical. I don't know what to do but I guess with a dozen or so investments in partnerships with Schedule K-1, I can no longer use TurboTax.

[ppumgrad]

Is anybody struggling with this on their 2021 taxes like me?  I'm using the online version and struggling big time.  It doesn't make sense that TT asks for QBI Carryovers as part of the other Carryovers, as if they are the same.  I have two K-1's for two LLC's that I had to also split into separate K-1's since there have been amounts in Boxes 2 and 3, or because a K-1 included a pass-through entity in addition to the partnership.  So four K-1's, all with different losses and incomes since 2019.  When I get to the Carryover section of one, it puts the correct amount into the passive loss carryover, but then also put's it into the QBI Carryover.  Then the other three K-1's also put the correct amount into the passive loss carryover, but for QBI Carryover is blank.  To further confuse, the calculations on 8995 for last year's QBI carryforward are clearly different than those on 8582 for the unallowed loss carryover.  I don't understand why if TT is able to calculate the correct QBI carryforward in form 8995 from last year, why can't it input those numbers into the appropriate screens.  I understand you must carryforward QBI losses from previous years that you had a negative overall QBI, and must allocate them to the appropriate years.  But how do you do that while putting the numbers into individual K-1's (some of which had positive QBI) to make the total QBI Carryover come out correct?  I don't want to enter more overall QBI carryforward than have.  The  QBI (Section 199A) Losses by Year Smart Worksheets made things ever more confusing, they had the exact same amounts in the Regular Tax and QBI columns for three of my K-1's, put one of the losses in 2018 for QBI and in 2019 for Regular Tax.  And then completely omitted a worksheet for my fourth K-1, the one that had the largest loss carryover.  My overall QBI is still negative so it really doesn't affect me this year, but I'd like to enter the correct info.  From reading this thread, I'm probably going to get errors when I get to the smart check.  Any help would be appreciated.  Thanks, in advance.