K1 Box 20 Code Z Cannot Leave Blank

[btrav68]

Hey folks,

I am having issues with my K1 as I cannot seem to get the box 20 code z portion to take without error. I have read multiple posts and I am still confused on what to do here. 

My K1 box 20 has code Z in it with "STMT" in the amount field. You cannot put "STMT" in there for TurboTax so I did as others suggested and left it blank and kept going. I do get additional questions and answer those appropriately, but still it fails the final check because I have entered code z with no value. I then added a value and it still fails...

I'd like to know exactly what to do here as I have seen that I should NOT just exclude the Z code information...

But it seems I cannot edit the underlying form directly and thus have to figure out the magic combo to get this right

Should I just continue even though it keeps asking me to check this value? 

On 199A the values I need to enter are:

• Net rental real estate income (loss) -895
• Qualified property 37,125

[btrav68]

The check error 

[ThomasM125]

Your need to go back through your K-1 entry and indicate you have an entry in box 20. When you get to the box 20 entry, choose code "Z - Section 199A information" and enter -895 in there as it represents the QBI rental loss amount as probably reported in box 2 on the K-1 schedule.

[btrav68]

@ThomasM125 

Thanks for your reply. 

I deleted the K1 and started over. I did put -895 in box 20 but it still didn't take it. 

What I discovered and in my opinion is poor implementation is that if you check the business income box on 199A form all the sudden more fields appear. After filling this in magic. Everything is good. 

[fcabrales]

Hello, I am having similar issues. I selected Box 20 Code Z, left it blank, and then included the information later on when prompted "we need some information about your 199A income. I input the numbers under Rental Income (Loss) and also UBIA of Qualified Property for this Business, same as you did. Turbotax accepts the inputs. However, when I go to Forms and check Form 8995 - Qualified Business Income Deduction (SImplified Computation), it is not reporting the rental loss I inlcued in Shcedule K1. Did you have similar issues? Any advise?

[Irene2805]

Unless you selected Active or Material participation for the rental income (loss), it is considered passive, and the  figure will not flow to Form 8995.

[fcabrales]

Thanks for your reply. I had selected "Active Participation, but the numbers are not flowing to Form 8995. I took a look at Form 8552 and the loss is reported under Worksheet 3 for Passive Activities. It should be under "Rental Real Estate Activities with Active Participation". Any idea why?

[JamesG1]

@btrav68

Perhaps you do not qualify for the Special Allowance for Rental Real Estate Activities.  See here and click Special Allowance for Rental Real Estate down the left hand side.

Your original post concerns an issue with the screen Enter Box 20 info.  Perhaps this will help.

At the screen Enter Box 20 info, you likely need to select code Z Section 199A information.  Code Z tells the software that qualified business income information needs to be entered at the screen We need some information about your 199A income.  Select Code Z and enter $0.  Click Continue.

At the screen We need some information about your 199A income, you will likely need to enter the following information: 

• Ordinary rental (loss) from this business,
• UBI of qualified property for this business.

Click the box for business income (loss) and enter the rental loss in the appropriate box.

Click the box for UBIA of qualified property and enter the value.

he Qualified Business Income Deduction was created by the 2017 Tax Cuts and Jobs Act (TCJA) and is in effect for tax years 2018 through 2025.  See this TurboTax Help.

[fcabrales]

Thanks! That is exactly the procedure I was using. However, the numbers do not flow through. I was playing around and noticed that if I leave empty the Box 2 - Rental Real Estate Income or Loss when the questions comes up, then the numbers flow through. Not sure how those two Box 2 and Code Z Section 199A are related. 

It is important to indicate that a loss reported in Box 2, so not sure If I should leave it blank. 

Appreciate your help!

[JamesG1]

You should report the loss.  The screen Enter Box 2 info reports, in your case, a loss to your tax return. 

Other answers in other parts of the tax return will determine whether that loss will offset other income in your tax return or be carried over to next year as a passive loss.  These are all issues related to taxable income.

The screen Enter Box 20 info asks you to select code Z Section 199A information.  Code Z tells the software that qualified business income information needs to be entered at the screen We need some information about your 199A income.  Select Code Z and enter $0.  Click Continue.

When you enter information at the screen We need some information about your 199A income, the software is determining whether and how this income will affect the Qualified Business Income Deduction computations.  Now we have moved away from taxable income to the the Qualified Business Income Deduction.

This individual entry is a loss but it could offset Qualified Business Income reported elsewhere in the tax return.  If there is no other Qualified Business Income in the tax return, the loss is carried forward to offset Qualified Business Income in a subsequent year's tax return.

[fcabrales]

That way none of my reported losses in Box 20 Code z follow through Form 8995. I guess Turbtotax is determining they are not applicable. Qualified Business Income or (loss) is calculated/reported as zero in Form 8995. There is no other Qualified Business Income in the tax Return. Per your comments, the loss would be carried forward to offset QBI in coming years. However, since the QBI (loss) is calculated as "zero", none of the losses are carried forward.  

This is different to what was reported in previous returns prepared by an accountant, even though the forms (K1) and others are quite similar. In the return prepared by my accountant, all numbers from Box 20 Code Z were flowing through to Form 8995 and since deductions were not being used, they were carried forward. 

[DaveF1006]

It depends. You need to provide details about your Code Z  transaction. To provide the details, you need to look at your supplementary statement that came with your K1. Here's how to edit.

1. Log into Turbo Tax  if using Turbo Tax Online
2. Go to federal>wages and income>S-corps, Partnerships, and Trusts>show more
3. Schedule K1>revisit
4. Select update next to Partnerships/LLC's(form 1065)
5. Select edit next to the K1 
6. Continue through the next couple of screens until you get to a screen that says Enter Box 20 Info. Press Continue
7. When you get to Box 20, enter the Z code from the drop-down but leave the amount blank. Press Continue
8. Make sure you select your information is at risk when you reach that screen
9. The next few screens will ask you specific information about your 199A income. All this information should be on the disclosure statement that came with your K-1.
10. Note: if you are using Turbo Tax software, you can select quick zoom at the bottom of the page where you entered Code Z in Box 20. That will also allow you to enter information from the disclosure statement

[fcabrales]

@DaveF1006 

Hi Dave! That is the procedure I am following. I read it in different posts from you in TT's website.

Still, the numbers from the Box 20 Code Z are not passing through the respective Form 8995 for example.

I've attached screenshots of the questionnaire and forms FYI. I was checking and the Box 2 loss amount is not reporting in Part I Rental Real State with Active Participation as was the case for last year, even though I replied I was active participant. Not sure if those two 8995 and 8582 are related.  

[DaveF1006]

It depends. To clarify, did you have passive loss carryovers from last year? According to this Turbo Tax link written by RobertG, "If the net overall QBI last year is less than zero, it is carried forward as a loss from a separate qualified business and will reduce any potential QBI deduction in the following year in 2020." So yes, depending on the circumstance, the 8995 and 8582 could be related.

[fcabrales]

@DaveF1006 

Where do I check passive loss carryovers from last year? Form 8995 Line 3? 

Still, none of the current Box 20 Code Z are showing up in the respective forms even though they are properly entered into the program. Not sure if this is a glitch or the actual loss becomes a QBI of zero.