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

Forum|Forum|6 years ago
March 22, 2020
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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

Level 12

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:

Each enterprise maintains its own books and records to track income and expenses;
At least 250 hours of rental services are performed per year per enterprise; and
(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

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scheduleAuthor

Level 2

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

Level 13

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.

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

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