I have clergy income from my organization reported on a W2. Why do I have a "qualified business net (loss)" on Form 8995 Line 3?

[davidg]

I had a small self-employment income, book royalties, on Schedule C but my organization pays me my main income.

[DavidS127]

Your Form 8995 Line 3 is tracking a loss on your Schedule C from 2018, to offset against any 2019 Schedule C income, as a part of your QBI deduction calculation.  You should be able to correlate this Line 3 number with losses (from your Schedule C and any other QBI income) in 2018.  

Your Schedule C makes you eligible for the Qualified Business Income (QBI) deduction, which allows certain small businesses to deduct 20% of net income.  But, to calculate the deduction, losses from the prior year are used to offset any current year income. 

[davidg]

Thanks DavidS127

That would make sense ... except that in 2018 I had a modest (mid 3 figures) gain (books I wrote, teaching honoraria) reported on my 2018 Schedules C, but TurboTax is entering a mid 4 figures loss and entering it on the 2019 From 8995 Line 3. I have never reported a loss on Schedules C, ever. So it seems that the software is pulling that out of the air, or in error. Is there a way to override it?

[davidg]

Despite over an hour with TurboTax experts and reviewing my past year returns, I still have no idea where the loss carried forward comes from. (I have never reported a loss.) However, to work around it I found that I override the incorrect figure in : Federal – Income – Other business situations -- Net Operating Loss/QBI Carryforward Loss.

[DaveF1006]

Please review this IRS link for more information. Normally if you had an housing allowance, you can deduct expenses include rent, mortgage interest, utilities, and other expenses directly relating to providing a home. If these expenses exceeded your allowance, then it is a net loss for Self-Employment purposes.  if you can't apply that net loss against the taxable income in your return, then there is a carryover. I don't know if this is what happened in your case but it might be an explanation.

Also if you reported income from  fees for performing marriages, baptisms, or other personal services, these are generally earnings from self-employment for income tax purposes. If you reported more expenses, then earnings, then this could be an explanation for the loss carryover from previous years. 

[davidg]

Thanks for these ideas, DaveF; make sense but not my situation. After a long time on the phone with 3 TT staff I found the place (noted in my other post) where I could delete the figure TT had entered into my 2019 forms. Those agents and I have no idea where the number came from; it was just there and didn't correspond to anything on prior year tax forms. DavidG

[mojoe9]

This may help because I ran into the same situation with a client.  The client, a minister, received a small amount of schedule C income from weddings, funerals, etc.  The negative number on Form 8895 came from totaling the following figures (using round numbers for the example):

Net Schedule C Income: $600

(less deduction for 1/2 of SE Tax on Schedule 1, Line 14): ($6500)*

QBI Loss on Line 1, column C of form 8995: ($5,900)

*Self employment tax was $13k because of wages and housing allowance

So, this at least explains where the negative number comes from.  Hope this helps.  

[Carl]

Just a heads up here.

to work around it I found that I override the incorrect figure

When you do an override, two things happen.

 - You completely invalidate the TurboTax 100% accuracy guarantee

- You can not e-file the return. You have to print, sign and mail it to the IRS. If a state return is involved, then you would have to mail the state return also.