Because of an error in TurboTax Business, you've incorrectly reported the qualified business income (QBI) on the 2018 Federal Partnership/S corporation return (Form 1065/1120S). As a result, the incorrect QBI on the federal partnership/S corporation passed through to the Schedule K-1 (Beneficiary’s Share of Income, Deductions, Credits, etc.) and may have caused the partner/shareholder to incorrectly report QBI on their 2018 individual tax return.
We fixed the issue in TurboTax Business and want to make sure you have the information to determine if your return is complete and accurate. We continuously strive to provide correct and accurate calculations in our TurboTax products. Sometimes that effort results in our finding errors after returns have been filed. If you need our help, we’ve provided contact information.
We suggest you amend the 2018 federal partnership/S corporation tax return (Form 1065/1120S). In addition, you should issue the amended Schedule K-1s to your members.
We’re here to help if you have questions or need assistance. You can call us at 1-877-216-2138 (Monday through Friday, 5 a.m. to 5 p.m. Pacific Time) to reach a tax expert who is prepared to assist you with this issue. Tell the expert you’re calling about 2018 federal business QBI.
We sincerely apologize for any inconvenience this may cause you. To correct the return:
- Launch TurboTax Business.
- Update TurboTax Business to the latest version before you amend return.
- If you're presented with a TurboTax 2018 Updater box after launching the program, select Update TurboTax 2018.
- If you aren’t prompted, manually check for updates. In TurboTax, from the menu, select Online > Check for Updates. Install any updates found by selecting Update TurboTax 2018.
- If updates are installed, relaunch the program.
- From the Work on a Tax Return screen, select Amend a Tax Return. Select the tax return you want to amend.
- Create a new copy of the return to amend. From the Amended Return screen, from the menu, select File > Save As to open the Save Tax Return box. The File Name field will be filled out with the file name of the current file. Add Amend to the name and select Save.
- After saving the return with a new file name, continue through the first few screens, answering the questions.
- From the Filing an Amended Return screen (the S-corporation return has two screens with this title, continue to the second one), you're ready to begin amending the return. The changes needed in the return aren't found in Step-by-Step mode, but are made in Forms mode.
- Select the Federal Review tab, select Error Check. On the Let’s install the latest tax updates.. screen, if you’ve already updated, select Continue Without Updating.
- If there are no errors, move ahead to step 13.
- Select Forms in the upper-right corner to enter Forms mode if the following error appears:
- Note the amount on line 12 is red. This is the total limited Section 179 deduction.
- Note that the sum of lines 9 and 10 are the total amount of deduction that could have been taken had the deduction not been limited. An amount on Line 10 indicates a Section 179 carryover from 2017.
- From the Forms in My Return list, select and open each Form 4562 for each business activity, and find the Form 4562, Line 12 Smart Worksheet. On line B of the Line 12 Smart Worksheet, enter the limited amount of Section 179 that belongs to this activity. Note that the amount on line B should not be more than the amount shown on line A. If there is a carryover of Section 179 from 2017, line C may be used to allocate a portion of that carryover to each activity as well.
- To clear the error message, (line 12 will change from red to black) make sure that the total amounts that you enter on lines B and C of Form 4562, Line 12 Smart Worksheets for each activity equals the total limited Section 179 deduction referenced above in step 10. If the Section 179 amount on line 12 isn't limited and there's a carryover on line 10, the total of line C on each Form 4562, Line 12 Smart Worksheets must equal the amount of that line 10 carryover.
- The corrected Section 199A income is displayed on Schedule K line 20 for partnership, and line 17 for S corporation. (If the return has multiple activities, see the 199A Summary Worksheet.) If you elected to exclude Section 179 deduction from QBI on 199A Summary Worksheet, or indicated activity was not a qualified trade/business on 199A Worksheet by Activity, the Section 199A income on Schedule K may not have changed compared to your originally filed return. If the Section 199A income on Schedule K didn't change, you don’t have to file an amended return and can stop following these instructions.
- Select Step-by-Step in the upper-right. Select the File tab.
- On the We’re ready to file your taxes screen, select Continue button. On the Select Filing Method screen, select File by mail, and then Continue. (If you select E-file, you'll see a message that the return is ineligible for e-filing.)
- On the Which Forms Would You like to File by Mail screen, you have only amended your federal return and don't need to amend any states. Select Do not print my state return to file by mail now and Print my Federal return to file by mail now, and then select Continue.
- On the Print Tax Return for Mailing screen, select Print Returns to Mail. Print the return as normal. When finished printing, select Continue.
- On the How Do You Want to Create Your K-1s screen, select Print. A PDF is created and displayed in your default PDF viewer program.
- In your PDF viewer, note that your federal K-1s and federal partner/shareholder letter have been generated. Select and print only the federal K-1s. When done, close the PDF viewer and return to TurboTax.
- On the How Do You Want to Create Your K-1s screen, select the Print/Save for Your Records tab.
- On the Print and Save Your Tax Return screen, select either Print or Save as PDF. This brings up the Form Selection box. Your state return hasn't changed, so there's no need to save or print it. In the Forms Selection box on the right side, uncheck the checkbox next to 2018 State Tax Return. Print and/or save the amended federal return for your records.
Form 4562: Section 179 Summary: Section 179 Summary: Line 12 – You have elected Section 179 on multiple activities, or have a Section 179 deduction on a K-1 activity. The total amount of Section 179 you may deduct has been limited. You must reallocate the Section 179 on one or more activities. See Tax Help for Form 4562, line 12 for details.