K1 issues for year 2022 Tax retrun.

[sam992116]

I am limited partner is some public traded partnerships/MLPs. When you fill K1, after all boxes interview K3 and box 1-20 question there are few questions, Describe the partnership.

Q1: I have passive activity losses carried over from last year

 I checked yes as there are losses shown on K1 worksheet.

Q2: All of my investments in this activity is at risk?

I also checked yes,  as partnership can go to Zero value.

Q3: I have at risk losses carrying over from 2021

Not sure about this one. I did talk to Turbo Tax CPA, and she said check Yes to that one. At that time by checking it did NOT change my taxes. I did Not pay attention to worksheet numbers. This one box did some issues, I think.

Q4: I personally paid Health insurance and long term (Health include dental)

I check that one yes as well as i did pay my own health insurance. Again turbo tax CPA told me to check yes but it did not change my taxes.

Issue is coming in K1 worksheet ( Section A, Passive Activity Adjustment to Income/loss Page 3 and Page 4 for AMT.

Let go back to 2021 return for same MLP.

For 2021 year gain/loss was ($ -10000, this number is Box 1 of K1 from Ordinary Business Income/loss) and suspended loss was from prior years ($-20000) = Loss suspended for current year = ($-30000). There numbers are made up for example only. For year 2021 and earlier I NEVER checked YES to box 3 and box 4 question mentioned in the top.

Now for 2022 I did check yes to Box 3 and Box 4 (describe the partnership) on advice of turbotax CPA.

In 2022 MLP produced ($-5000, Box 1 of K1) and I have carry over of ($-30000)

now software did sort of something new.

This is in worksheet of K1, page 3

It is showing ($-35000) as gain/loss limitation column and next column is suspended loss carry over as ($-30000) = Loss suspened for current year = ($-65000)

I think it was due to checking YES to earlier question Q3: I have at risk losses carrying over from 2021

At that time it did NOT change my tax amount so did not pay much attention to worksheets.

Issue is

I sold this partnership in 2023. My understanding is source of this Ordinary income/loss for MLP is depreciation  so at time of sale it is sort of reversed to show value which is reported on Final K1 as Gain subject to recapature as ordinary income. My understand is usually these number sort of close to each other.

Due to this error this extra loss (almost 30k!) and it is reducing my income on Sch 1 of 1040 on my 2023 return.

What are my options?

[sam992116]

I described issue earlier. I thought  about amending my 2022 return

I am trying to amend my 2022 return. I saved a new amended return and went to Other Tax situation and amend a return and wage and income and K1 and went to Interview section Describe the partnership.

I Unchecked to questions

Q: I have at risk losses carrying over from 2021

Q: I personally paid Health insurance and long term (Health include dental)

then I went through interview and I checked Form mode but it did NOT correct calculation I mentioned earlier.

I went to interview mode again. Turbo Tax did remove/uncheck answer to Health insurance but at risk loss carry over from 2021 still is Checked. So worksheet are still showing same numbers. I have uncheck this question like 5 or 6 times but question is still checked and Calculation are same which are showing twice as much carry over loss. What are my options.

Sorry lot of details and I hope you can understand what I am trying to say.  Thank for any help or suggestion in advance. I will really appreciate any feedback.

[sam992116]

Any one?

[tagteam]

I'll page Champs @Rick19744 and also @Mike9241.

[sam992116]

thanks

[Mike9241]

I don't really understand what your issues are, nor do I understand why you are having problems with amending 2022. Have you contacted support because you can allow them to actually see your return and input which I can't. if support for 2022 is no longer available you may need to consult a pro for preparation of your amended return for 2022. then you'll have issues with 2023 with Turbotax because certain carryforward info may need to be changed

at-risk would only be applicable if net cumulative losses and distributions exceed your tax basis.

if at-risk doesn't apply unlink to form 6198/ got to forms mode and delete form 6198. Look ar K-1 schedule L.  

health insurance - not sure where you entered it but it is not applicable to your PTP. Look at the supplemental sales schedule. it will either have a column labelled "Cost Basis" or "Adjusted Tax Basis" or something similar add any ordinary income recapture indicated. If this is positive you're at risk but that only tells the story for 2023. for 2022 you again would need to look at that year's schedule L if beginning capital + ending Nonrecourse debt (Part II line k1) is positive you're at risk.   

for your sale in 2023 there should be a supplemental sales schedule which will allow you to enter the info necessary to properly report the transaction.  however, the 2022 amendments may require you to change the numbers that were originally rolled from 2022 for this k-01

here's info on reporting the sale

hope the following helps - total disposition only

MLP and PTP reporting k-1 and 8949/1099-B
Enter the k-1 info
Check the PTP box
If total disposition then:
Check final K-1 (s/b marked on actual k-1)
Check sold or otherwise disposed of your entire interest
On the k-1 disposition section for sales price use the ordinary income. It would be reported in box 20AB of K-1 and a column on the sales schedule. Sometimes you’ll see a column with the “751” or the words “Gain subject to recapture as ordinary income” or similar wording on the sales schedule. No 20AB, no column on the sales schedule indicated as ordinary income, then there is no ordinary income. The following is for the k-1 sale section - not the 8949/schedule D
Sales Price = line 20AB (1065 k1) use 0 if box 20AB is missing or zero and no ordinary income column on the sales schedule
* Selling expenses = 0
* Basis = 0 (zero – nothing else)
* Gain is computed and should be the same as the sales price.
* Ordinary gain = enter the same amount as the sales price
* Other lines should be zero
This amount flows to form 4797 line 10 and is taxed as ordinary income. This step is necessary, so any suspended passive losses are now allowed assuming complete disposition.
Some do not understand the above. The 1099-B (capital gain/loss portion) reporting is not done in this section in Turbotax. Doing so will result in reporting the sale twice if you enter the 1099-B info.
Now for the 8949/1099-B Capital gain/loss reporting
The broker’s form is probably coded as B or E – sales proceeds but not cost basis reported to the IRS. This is because the broker does not track the tax basis. It used what you paid or was adjusted due to a merger or acquisition but does not reflect the k-1 activity.
The correct tax basis is (note that your sales schedule may have a column that reports the adjusted/average tax/cost basis excluding the ordinary income which must be added):
What’s on the sales schedule as purchase price/initial tax basis (usually column 4). it may differ from what you paid originally because of a merger or acquisition. Some of your original cost is allocated to the new security.
There is a column on the sales schedule that says cumulative adjustments to the basis. If it’s positive add it to the cost shown. If it’s negative subtract the amount.
Finally, add the amount of ordinary income reported above.
The result is your corrected cost/tax basis for form 8949 – the capital gain/loss portion.
Note that on some sales schedules, there may be a column with your adjusted basis already computed. To that add the ordinary income. Read the info provided at the top of the schedule about what the columns represent.

Some other things. Look at line 20AB. That number should be added to the ordinary income above for reporting the 199A (qualified business income from the PTP). You don’t have to enter this but then you lose out on a tax deduction = 20% of this amount.

[sam992116]

@Mike9241 

Thanks for taking your time and answer in very good detail. Really appreciate it.

For year 2022 Amendment

I have several partnerships and some partnerships have from 6198 and there is nothing in this form except ZERO in Line 3 (other Income) and Line 5 (current year profit). only few.

All others have AT Risk Wks- P and At Risk AMT and Health LTS Wks.

I think that At Risk Wks is one which is doing the magic of doubling my Carry over Losses. I checked my 2021 return there is No form At Risk Wks.

Situation:

Since I am Not able to Uncheck box to question I have AT RISK losses ( I unchecked and went through interview and only to see it checked again by software),

Q: Should I delete Form 6198 in few of these MLP (although it has no information) and see if Question is now unchecked in Box I have AT risk losses?

Q: Should I delete both from 6198 and At Risk Wks- P and At Riks Wks-AMT in all K1 partnerships.

I am able to Uncheck to answer I have paid Health insurance. Even though I unchecked it successfully but Health LTH wks is still there with NO information. It does not disappear.

Q: Should I Uncheck Health care question or delete Health LTC WKS which route is more preferable?

Question I am trying to understand is when Removing information with TurboTax which route is better, do it withing Interview or Delete or change information withing Forms?

[Rick19744 · Accepted solution]

Here are a few high level comments:

• Since we can't see your return, and based on the issue you are having, I believe you need to contact TT support as they will have the ability to see your actual tax return.
• The issue appears to be that TT is some how doubling up the $30,000 loss carryover.
  • This could just be a glitch or something not checked appropriately
  • Only someone at TT would be able to determine this
• Have you indicated in TT that this is a PTP?  
• You also don't mention if you used TT in 2021; not real clear as to whether the TT software was used or you are inputting the information from scratch.  I wouldn't expect to see some of the questions being asked if you used TT in 2021.
• Unchecking the two boxes you noted in a reply was the correct thing to do.
• This is just one of those situations that a forum such as this is just not able to diagnose easily.

[sam992116]

@Rick19744 

Thanks I have Called TT several Times. First you talk to someone known as Product specialist and they have no idea about taxes and Product Specialist I think only are there to  tell what are different products or sell you higher price items.

Once you go through product specialist and go to Tax specialist. For some reason they all know about K1 but when I describe situation they are clueless what to do. Only good answer I got is, this is software issue so they don't know what to do. I am not able to find right person who knows K1s like you guys do. Even though you are NOT able to see my return but you still understand issues very clearly. Most TT tax specialist are clueless even Tax return is in front of them (Screen Sharing).

Yes I used TT in 2021. For 2022 return I called TT for different issue of K1 and I asked about questions At risk loss and Health care. TT CPA told me go ahead and check them. It did not change Tax and I did not look worksheet. Again you need to look in very detail to find out what is happening.

My understanding is best route to enter or delete information in TT is via interview mode but software is NOT letting me uncheck a box. I unchecked and it goes back checked by software and At risk worksheets are still there.

Q: Is At Risk Wks P and At risk Wks Alt is same form 6198?

Should I delete these to see what happens. Again this is additional saved return so I still have original return.

[Rick19744]

Follow-up responses:

• I believe the issue is your ability in not being able to have TT "uncheck" the at-risk box.  Plus I'm not clear on whether you entered an amount in the area when first entering the information.
• If you have an amount in this box, enter "0".  If it does not let you enter zero, then just put in $1.
• As stated previously, the system is doubling up the $30,000 carryover.
• See if bullet #2 resolves the issue.
• If it does not resolve the issue, then we will see if we can expedite the issue within our limited means of communication with TT.

[sam992116]

Thanks @Rick19744 

In TT interview mode,

After partnership info, there are boxes 1-20 and k3 and they all are for current year.

After that there is Interview, Describe the partnership.

there are 2 questions

I have  passive losses carry over (I checked yes and it is correction option)

I have AT Risk Losses (I checked it by mistake and it was wrong option as I realized now)

After this interview TT only asking/showing you about passive losses both for regular and AMT. There is NO interview or Box where you can see or change At risk losses in Interview mode.

Only thing you can do about at risk losses is within work sheets in FORM MODE.

That's what I did

I checked for year 2021 Tax File, I did NOT check AT RISK losses Carryover Box in interview mode so there is No At Risk Worksheet so I have nothing to compare to.

For year 2022, I went to AT risk Carry over Work Sheet in Form Mode. It has first Column losses from current year (lets say it is -$1000) and it is correct from box 1 of K1. Then there is Carry over Losses. I changed it ZERO. 

This Seems to change every thing. In Partnership Main worksheet now I can see Total loss carry over as

-$31000 (-1000 from current year and -30000 from previous years) which should be correct. Before this number was -61000

Then I went back to Interview Mode, I am still NOT able to uncheck At Risk loss carry over box (I unchecked and went through whole interview and only to see it checked back by software).

[Mike9241]

you say you have multiple partnerships. the at-risk rules apply to each one separately 

income is never subject to at-risk limitations

if a partnership loss is not at risk there will be amounts on form 6198 lines 20 and 21

for publicly traded partnerships, despite what the form says none of the loss will flow to form 8582 only the at-risk section of the K-1 

there may also be an issue with the PTP sales schedule. It may not take into account losses that cannot/ were not deducted because of at-risk limitations. However, any ordinary income recapture adds to tax basis and to the extent you now have positive tax basis any prior year at-risk loss and suspended PAL loss should now be allowed.  

[Rick19744]

Sometimes you need to just make sure you get the correct bottom line, regardless of some minor technical glitches within TT.

Based on your reply, it appears you have resolved the issue. 

You should not have checked the box for carry over passive losses as TT should have this already within their system; since you indicate that you used the software in 2021.

Just review the return once complete to make sure it is what you expect.

PTP's, as you may already know, are each maintained separately; unlike regular passive loss activities.

[sam992116]

@Mike9241 

I have multiple MLP k1, so I will correct each one of them. I was using one as example to understand what is happening.

I am not seeing Form 6198 and when I typed to open from 6198, it shows up blank. That form does says Form 6198.

However there is At Risk Worksheet and in that worksheet it says above line Items Details by Form 6198 line items. So At Risk Worksheet and Form 6198 are the same thing?

At Risk Form has sections

Section A -Ordinary

Section B- Sch D

Section C- 4797

Section D - 6781and so on.

Does all Carry over Losses from Individual PTP k1 go to composite form and yes what is number?

I have no Sale in year 2022. Sale is in year 2023.

Can I file Amended Return electronically or paper copy?

What to file? as I am deleting Forms and what should be reason?

[sam992116]

@Rick19744 

Thanks for your input.

There are 2 boxes for Carry over losses

Passive Activity Loss (in the past I only checked this box).

At Risk Loss

Should I only Enter Zero for carry over losses column in At risk Worksheet (as it has removed duplicate losses) or Delete that At Risk Form worksheet as well? Again At Risk Box with K1 Interview is still checked and it is NOT going away.

Now few questions Regarding 2023 Return.

I have already completed (not filed yet) 2023 return (with all K1s) and thats when I realized numbers don't add up.

Q1: Do I have make a new 2023 return from start and get data from Amended 2022 return?

 or

Can I delete previous years return data from 2023 and then import data from Amended 2022? If yes how?