Relationship Between qualified business income (QBI)/Form 8995 and 1099-DIV's Box 199A dividends

[amir7980]

Hi,

I've used multiple tax softwares in the past month, and after entering information for 1099-DIV, it appears that every single one of them, including TurboTax (Premier), creates an IRS Form 8995 (Qualified Business Income Deduction) with box 5 populated with a small amount for item "Qualified REIT dividends".

According to the IRS (IRS finalizes guidance for the section 199A deduction for shareholders of Regulated Investment Compa...) this appears to be the case (Instructions for Form 1099-DIV (01/2022) | Internal Revenue Service (irs.gov)). In my case, the 1099-DIV forms sent by the brokerage firms contain box "5- Section 199A dividends", accrued possibly from the REIT dividend investments of some of the underlying assets for that fiscal year.

My problem is that I do not have a business, and I'm filing my taxes as an individual. Therefore, I do not understand why this form gets generated.

My question is, can I delete this form safely from my TurboTax before filing federal taxes?

UPDATE: Reading a bit about this QBI, there might be an investment income component to it according to Facts About the Qualified Business Income Deduction | Internal Revenue Service (irs.gov), and also on this post (What is the Qualified Business Income (QBI) deduction? (intuit.com)), the author states:

For the purposes of the deduction, QBI is defined as net business income, excluding:

• Income generated outside the United States (N/A)
• Investment income (Applicable?)
• W-2 compensation paid to an S corporation owner (N/A)
• Guaranteed payments to a partner (N/A)
• Income from REITs, publicly traded partnerships, and qualified cooperatives (these entities may qualify for a 20% deduction under a different set of rules, the explanation of which is beyond the scope of this FAQ). (N/A?)

But I am still not sure if I am required to have this form.

[Goog94]

This amount is usually very small that it is unlikely to change your return by more than a couple of dollars, if at all. If you bought a security and receive these 199A dividends, then you are a shareholder of the business which paid these dividends through the purchase of that security. In addition, the 199A dividends will provide you a deduction. Box 5 is not an income item, as it has already been included in Box 1 of your 1099. You can safely delete it from return. The IRS allows you to take this deduction, but you are not required to do so.

[Mike9241 · Accepted solution]

while the B in QBI stands for "business" you don't need one to get that deduction.  when Congress wrote the tax laws there were certain non-business items they decided could be included in the computation of the deduction. that includes qualified dividends from real estate investment trusts (REIT) or 199A dividends. if you leave line 5 on the 1099-Div blank that 8995, where the deduction is computed, will disappear. The IRS will not care because that amount is also included in box 1 so you are paying taxes on them and it is already included in investment income.  all that one can say is that REITs have good lobbyists. 

[amir7980]

Thanks, that makes sense. I read a few more articles, and that seems to be the case.

[amir7980]

Correct. I read a few other notes on IRS site, and that's exactly the case when it comes to some of these funds with underlying qualified dividends related to REIT investments. Thanks.