No, you would not enter all the numbers (Boxes 8 through 20) in both K-1s.
I believe the best approach is to enter the information in Boxes 8 through 20 on the K-1 that reports the Box 2 amount, and report only the Box 1 amount on the other K-1.
The administrative information ( Part I - Information about the Partnership, Part II - Information about the Partner) go on both K-1s, with one exception - Section J (Partner's Share of Profit, Loss and Capital) does not go on both K-1s.
No, you would not enter all the numbers (Boxes 8 through 20) in both K-1s.
I believe the best approach is to enter the information in Boxes 8 through 20 on the K-1 that reports the Box 2 amount, and report only the Box 1 amount on the other K-1.
The administrative information ( Part I - Information about the Partnership, Part II - Information about the Partner) go on both K-1s, with one exception - Section J (Partner's Share of Profit, Loss and Capital) does not go on both K-1s.
Thank you for your reply but I have a follow-up question. You state Section J of the admin info (Partner's Share of Profit, Loss, and Capital) does not go on both K-1s. Since that's the case, which K-1 do you include this information? The K-1 reporting Box 1 amount or Box 2 amount? THANK YOU!
Put the section J info on the K-1 that best fits the main business function. In other words, if it’s a real estate rental business, put everything on the K-1 with Line 2. It’s a primarily a regular business, put it all on the K-1 with Line 1. It really doesn’t matter which one it goes on, you just want it entered only once, on one K-1 or the other. You’re doing this to solve TurboTax’s entry glitch, not the IRS’s.
The reason to put it in the K-1 most like the main function of the business is that in future years you may wind up with only a Line 1 or a Line 2 entry and won’t need that extra K-1.
This is great information, thank you! Really appreciate you breaking it down to the why's (Steve Marc). I do have one extra question and Steve Marc since you responded 1 hour ago I'm hoping you will see this... The above says to not include Section J on both K-1 entries into TT. This seems to cover Partner's share of profit, loss and capital... does that mean it extends to Part II section K and L? Those seem to be linked in concept/info. Thank you!!!
Sorry, accidentally posted a duplicate question. Question above still in play, but ignore this comment please.
Yes, K and L should only be on one of your K-1s, you don’t want to double enter any of those. Remember, the IRS already has that K-1, your just entering it on two K-1s because TurboTax can’t handle a K-1 with both Lines 1 and 2 entered.
Thank you so much Steve Marc, been searching the question database for answers on that specific section. That makes sense.
So what do I do if I did put that info on both K-1 entries in Turbo Tax for one K-1 in previous years? Does anyone know if I need to file amended returns?
If it’s only the K and L info it won’t matter, because that is just your capital account, not your tax basis. If you entered all of the other lines, like income and the deductions in the later lines, then you may have paid too much or too little tax.
Okay, thank you. That helps a lot because it appears we have had some double entries on section J, K and L (and sometimes no entry) but the Part III (income and deduction) entries have only been entered once. Thank you for saving me a lot of time and headache.
Just a clarification also on your capital account vs your tax basis. The capital account is the partnership reconciling your account with what is on the books, but not on the K-1 yet, just like balancing a checkbook, you don’t use that number as your basis because there may be something in that reconciliation that will actually hit next years K-1.
Also, your tax basis can include recourse, non-recourse, and qualified non-recourse financing, plus your capital you contributed, plus K-1 earnings, minus K-1 deductions, minus distributions. You deduct losses if you have enough tax basis. Your tax basis can never go below zero. Your capital account usually won’t add financing into the figures.
But before you take that loss, you also have to check your at risk limitations. You have to look back at financing and add only the financing you are personally at risk for. Recourse and Non-recourse financing usually doesn’t count unless you signed for the loan. Qualified non-recourse (like real estate loans) usually do.
Then you have to apply the passive activity limitations, in other words, losses on a K-1 that you are not actively or materially participating in can only be offset by profits from another passive activity, or are carried forward to a future year. Don’t worry about passive losses, TurboTax handles those calculations and carry forwards.
But TurboTax does not calculate your tax basis, so just keep a running spreadsheet for those numbers in case you’re ever audited.
Thank you for the additional clarification. I think I need to go back and look at some definitions to fully grasp what I need to do going forward. Really appreciate you taking the extra time to try to make some sense out of all this - I'm sure it's not as complicated as I'm making it.
No, it’s confusing because the IRS makes it confusing! I’ve just had to grind through it to figure it out. But if you’ve kept your old K-1s figuring your tax basis will be relatively easy, and then just add the new numbers each year to your spreadsheet.
That is true. Thank you for all the information so I don't have to "re-create the wheel" so to speak. I'm a stickler for records, so I do have all our old K-1s. I'm going to create a spreadsheet today with all the Part II history we've received over the years - thank you for the advice.
Thanks for the helpful information. On which K-1 would you place the information in Box 5 (Interest Income)?
Actually what works best is on the first K-1 entry you enter everything EXCEPT box 2 and on the second K-1 ONLY box 2 ... since both forms have the same EIN they are married by the program automatically.
what about boxes 5, 6, and 7? Do they go with box 1 or 2, or does it not matter
It does not matter for Boxes 5,6,or 7- TurboTax will put them in the correct place on the 1040.
Wow This is a MAJOR deficiency in Turbo Tax. The forms that are sent by the Funds themselves are straightforward. Why cant they just make a single form that handles both types 1 and 2. I think there must be a better answer such as they seperate passive and non-passive income. In which case the whole process should be automated and Turbo Tax should figure it out for you.
If you have multiple K-1 entries (for lines 1 and 2 in my case) with same Tax ID #:
Later in the schedule K-1 entry, Turbotax asks about "Aggregation of Business Operations". Since this is the business split up by Turbotax for programming reasons, should the answer be "yes" and should form 8995-A schedule B filled out? I get more of a return with the aggregation of business operations "yes" than without. While I understand that the "Aggregation" was initially created for like small businesses LLC combining, in this case it is the identical business...
Thanks for your answer!
Yes, the answer is yes and yes a form 8995 and associated schedules should be filled out. If you qualify for the deduction you should definitely take it.