K-1 interview question about SSTB income in prior years...

[PerpetuallyConfused]

For my 2023 return, I'm entering the information from the K-1 and K-3 I just got from an LP.  (The documents were due in March, but they were late.) I have carryover passive QBI losses from 2020-2022 for this LP, and for those years, TT asks, "did you have any activities on your return that were classified as SSTBs or had income attributable to SSTBs?"  I don't know how to answer this question.

This is the first year I've done my own taxes. In 2020-2022, my CPA did them. Searching my tax returns for those years yields no hits for "SSTB", but the LP's K-1 for each year has "X - SSTB" under Code Z in Box 20. Each year it's a loss, however. Does that constitute an SSTB activity on my return?

Adding to my confusion is that this page says, "The SSTB label is irrelevant if your 2023 total taxable income is... $364,200 if you're filing jointly or less." In the interview question immediately prior to the one about SSTB income, I told TT that I wouldn't have that much income.

Can someone clarify how I should answer this question? 

Thanks.

[Mike9241 · Accepted solution]

A which contains the rules for QBI

we can't see the K-1s but if SSTB is checked on 20Z it should be presumed that the activities of the partnership are SSTB

from IRC code section  199A

(2)Carryover of losses
If the net amount of qualified income, gain, deduction, and loss with respect to qualified trades or businesses of the taxpayer for any taxable year is less than zero, such amount shall be treated as a loss from a qualified trade or business in the succeeding taxable year.

(2)Specified service trade or business
The term “specified service trade or business” means any trade or business—
(A)which is described in section 1202(e)(3)(A) (applied without regard to the words “engineering, architecture,”) or which would be so described if the term “employees or owners” were substituted for “employees” therein, or

IRC 1202(e)(3)(A) so if you know what the partnership does you can determine if it is a SSTB

(3)Qualified trade or business
For purposes of this subsection, the term “qualified trade or business” means any trade or business other than—
(A)any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees,

[PerpetuallyConfused]

Thanks for the detailed answer.  I decided to follow your suggestion that the presence of SSTB in Box 20 implies that I have SSTB activities through the LP, so I said yes for each year. I then said my income was below the threshold in each year, and I'm assuming it will all work out. 

I printed a PDF copy of my return, then went back and said no to the SSTB question for each year and printed a PDF of the resulting return. Comparing them showed only a minor change to  the federal carryover worksheet (and no changes anywhere else), so I'm assuming that at least in my case, this is not something that is likely to make a noticable difference in my taxes in future years.  (It doesn't make any difference for 2023.)

I guess this is the kind of stuff I used to pay my CPA to deal with. Unfortunately, he started making mistakes and not caring that he did, so I had to go my own way.