Did the program update change how qualified business income is computed?

[schedule]

I already filed my taxes, but I noticed that now when I load TurboTax it shows that I owe several hundred dollars more than I did when I filed my taxes.  The only that that has changed is the program did an update.  I did a comparison and it looks like it changed the amount it calculated for my QB income (specifically my rental property income).  Now that Intuit hides program update notes from its customers so we are all left in the dark, can someone at Intuit tell me if the QB calculations changed with that last program update?

[VictoriaD75]

Income from these types of rentals is specifically excluded for the purposes of the QBI deduction:

• Passive rental activities that are not considered a trade or business
  • For example, a single-family dwelling rented out for a year or more in which there is little or no interaction between the landlord and the tenants other than periodically collecting rent and the occasional repair
• Property used as a residence by the taxpayer for any part of the year under IRC § 280A
  • This includes vacation homes, cabins, seasonal or "snowbird" residences, etc.
• Triple-Net (NNN) leases, where the tenant or lessee pays real estate taxes, insurance, and maintenance in addition to rent and utilities
• Rentals located outside the United States
• Land rentals

If your rental or rental activities fall into any of the above categories, you can't take the QBI deduction on the income generated.

Turns out you can qualify for the QBI deduction, as long as your rental activities constitute a trade or business. Generally, this means each rental real estate enterprise (a rental property or group of similar rental properties, including K-1 rental income) must satisfy these requirements:

1. Each enterprise maintains its own books and records to track income and expenses;
2. At least 250 hours of rental services are performed per year per enterprise; and
3. (Starting with tax year 2019) Contemporaneous records of services performed are kept which includes who performed the service, description of service, the date of the service, and how long it took (who, what, when, and how long).

It is possible the software is disallowing your QBI deduction automatically until you answer the questions regarding rental income, as this is a tricky area in QBI calculation. When did you file?

Can I Get QBI on Rental Income

[schedule]

I understand how the tax code works.  My issues isn't a tax problem, it's a technical issue with the software. 

I did some more testing of it and it appears that the last update introduced a bug into the software.  When entering rental information, if the user doesn't enter a name on the page that says "Name and employer ID number for this rental" page, then the program no longer includes that income on the Qualified Business Income Deduction worksheet (even though it qualifies for QBI and the user chose "yes" for QBI income and the program says it's counting it for QBI (but it doesn't actually!).  If I go back and enter any name in that box (even without the EIN), then it counts the QBI correctly.

This is a major bug with TurboTax that is going to cause users to overpay their taxes because many rental property owners won't get the QBI deduction even if they qualify for it.  Can you report it to Intuit?  Intuit doesn't give users a way to report actual bugs.

[DavidS127]

It would be helpful to have a TurboTax ".tax2019" file that is experiencing this issue.  You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions:

On your menu bar at the very top, click “Online” and then “Send Tax File to Agent”.  When you click to send, you will get a pop-up with a token number.  Reply with the token number and I’ll be able to open a TurboTax tax return with your numbers but not your personal information.  That may help diagnose the issue.

[DavidS127]

This issue has been reported for investigation, your information was very helpful.

Your filed return should be calculated correctly.  When the issue is resolved, your updated software should restore the correct calculation.

[schedule]

Token number 626082.

Thank you for looking into that.

[gleebmek]

Your investigation helped me greatly.  I had to file an amended return due to a belated correction to a 1099-DIV.  I was bewildered when I got a different refund upon entering the SAME *.tax2019 file I had used the first time!  Absolutely nothing had changed except the update.  I traced the difference down to the QBI page.  Without your explanation I would have been stumped. Even now I have to deal with another complication in the amended return.   Can I roll back the update?

[gleebmek]

The QBI update has affected me, too.  I had to file an amended return. I performed the recommended update.  When I went back into turbotax and entered the same *.tax2019 file, I got back a return that was different from the original.  I panicked, thinking I lost the original *tax2019 file.  After I did some comparisons with old and new forms, I traced the problem to the QBI calculation and how it handled the rental.  I made no change to the tax2019 file, yet the update computed my taxes differently.  That complicates my amended return.  Is there a way to roll back the update?

[schedule]

I don't think there is a way to roll back the update, but what you can do is go to each rental property you have and click through the steps until you get to the "Name and employer ID number for this rental" page, and on that page just enter any name.  You can leave the employer ID blank.  That should fix the QBI calculation.

[DavidS127]

Yes, the solution provided by Community user schedule will work for you.  It is very important to take that step before you start the amendment process, so that your "starting point" for the amendment matches what you originally filed.  So, first take the steps to enter any name, e.g., the name you use for the rental property in TurboTax, leave the EIN box blank, and then start the amendment process.

@gleebmek