S Corp 199A QBI deduction

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Hope123
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S Corp 199A QBI deduction

Post by Hope123 » Wed Sep 11, 2019 5:09 pm

Hi everyone, hoping to get some clarification re: QBI deduction. One person S Corp filing form 1120S and K-1 and eligible for QBI deduction. CPA prepared the returns and K-1 doesn’t show qualified business income on it but the deduction is being added to 1040. My understanding is that k-1 line 17, code v should have the QBI amount and that will flow into line 9 on 1040. CPA says it’s not necessary for k-1 to have the 199A deduction. Does anyone know if this is accurate? Is eligibility for QBI deduction determined at the entity level? If yes, k-1 should be revised to show the QBI, correct? I appreciate any insight someone can share. TIA!

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MP123
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Re: S Corp 199A QBI deduction

Post by MP123 » Wed Sep 11, 2019 7:38 pm

My TurboTax Business prepared 1120s shows codes V, W, and X on K-1 line 17 for the various QBI related amounts.

I don't know if it's required or not but it's pretty simple to calculate especially if you're a 100% shareholder, not sure why your CPA doesn't want to.

Sec 199a is so new there may still be some confusion about how to do things.

hillman
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Re: S Corp 199A QBI deduction

Post by hillman » Wed Sep 11, 2019 8:19 pm

I’ll try to find the reference tomorrow when I’m in the office, but I believe the final Regulations state that any item that is not reported directly on the K-1 is presumed to be zero in regards to QBI and 199A. This is not an issue if your AGI is under the threshold that requires the W2 and UBIA limits (taxable income of $157.5k for 2018 and single, double for married) . For example, if wages are not reported in box 17 they are presumed to be zero in the calculation. However, you have all the information required to show what your qualified business income is from this activity on the face of the K-1.

Here’s an excerpt from the register, couldn’t find the final reg:
The Treasury Department and the IRS agree with commenters that all of an RPE's items related to section 199A should not be presumed to be zero because of a failure to report one item. For example, an RPE may have sufficient W-2 wages and send out that information, but decline to provide information for UBIA of qualified property because it is not necessary or is an insignificant amount. Accordingly, the final regulations retain the reporting requirement but revise the presumption to provide that if an RPE fails to separately identify or report an item of QBI, W-2 wages, or UBIA of qualified property, the owner's share of each unreported item of positive QBI, W-2 wages, or UBIA of qualified property attributable to trades or businesses engaged in by that RPE will be presumed to be zero. The final regulations also provide that such information can be reported on an amended or late filed return for any open tax year. Guidance on the application of penalties is beyond the scope of these regulations.
Sorry for this. Sent from my phone.

In short, if your taxable income is such that you’re not required to consider the W2 and UBIA limits in determining your deduction, you’re fine without the information in Box 17

hillman
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Re: S Corp 199A QBI deduction

Post by hillman » Wed Sep 11, 2019 8:22 pm

And QBI elements/components are determined at the entity level and then allocated to the shareholders or partners and reported to them through their K-1’s. They then determine their deduction based on their individual situation.

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MP123
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Re: S Corp 199A QBI deduction

Post by MP123 » Wed Sep 11, 2019 8:36 pm

hillman wrote:
Wed Sep 11, 2019 8:19 pm
In short, if your taxable income is such that you’re not required to consider the W2 and UBIA limits in determining your deduction, you’re fine without the information in Box 17
But that raises the question of how someone preparing a K-1 for a more widely held S corp would even know the details of the all the shareholders other income.

Or maybe it's always best to include the line 17 codes but (perhaps) in OP's case they aren't needed?

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Hope123
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Re: S Corp 199A QBI deduction

Post by Hope123 » Thu Sep 12, 2019 1:05 am

hillman wrote:
Wed Sep 11, 2019 8:22 pm
And QBI elements/components are determined at the entity level and then allocated to the shareholders or partners and reported to them through their K-1’s. They then determine their deduction based on their individual situation.
Thanks you got the reply. Our AGI is below the threshold and we are eligible for the deduction.

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Hope123
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Re: S Corp 199A QBI deduction

Post by Hope123 » Thu Sep 12, 2019 1:07 am

MP123 wrote:
Wed Sep 11, 2019 8:36 pm
hillman wrote:
Wed Sep 11, 2019 8:19 pm
In short, if your taxable income is such that you’re not required to consider the W2 and UBIA limits in determining your deduction, you’re fine without the information in Box 17
But that raises the question of how someone preparing a K-1 for a more widely held S corp would even know the details of the all the shareholders other income.

Or maybe it's always best to include the line 17 codes but (perhaps) in OP's case they aren't needed?
Thank you for the reply. It’s a one person S Corp and the accountant is preparing both business and personal returns.

hillman
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Re: S Corp 199A QBI deduction

Post by hillman » Thu Sep 12, 2019 5:48 am

MP123 wrote:
Wed Sep 11, 2019 8:36 pm
hillman wrote:
Wed Sep 11, 2019 8:19 pm
In short, if your taxable income is such that you’re not required to consider the W2 and UBIA limits in determining your deduction, you’re fine without the information in Box 17
But that raises the question of how someone preparing a K-1 for a more widely held S corp would even know the details of the all the shareholders other income.

Or maybe it's always best to include the line 17 codes but (perhaps) in OP's case they aren't needed?
Exactly!
It is definitely a best practice, if practicable, to provide that information to all shareholders or partners.
As I believe you said in another post, this is still so early everyone, regulators, preparers, and taxpayers, are still trying to figure out the ins and outs. The next step will be when people misapply poorly written rules and guidance in good faith and have to deal with examinations.

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Artful Dodger
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Re: S Corp 199A QBI deduction

Post by Artful Dodger » Fri Sep 13, 2019 11:00 am

I pay an accountant for my s corp return and k-1. I checked and the ordinary business income was reported on line 17 of my k-1. When I did my personal taxes with turbo tax, the amount was applied and the deduction popped up on line 9 of the 1040. So, yes, I think it's better to have it shown on the k-1.

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