EricF

Mine was accepted, too, just now!

If you want someone to be the 3rd party designee, you must check the "Yes" box. If you want that person to be the preparer, you check the other box marked, "If yes, ...etc." That's what ATX is currently not allowing. If you do not check yes and fill in a designee's name below, the name will show up on Schedule 6, Foreign Address and Third Party Designee.

Find the "other items" worksheet on a tab related to Sch K, Line 20c for partnerships, or Sch K, Line 17d for S corporations.

The person on the ATX support line should not be making sweeping tax pronouncements like "someone who has a schedule C can't make the S-election." BulldogTom is correct that generally the sole proprietor can form a corporation to make an S election. But also, if he formed an LLC that was treated as a disregarded entity reported on a Schedule C, he can file Form 8832 to change it to a corporate entity and elect S status.

LLCs are created for all kinds of purposes other than to conduct business. The main purpose of an LLC is to attempt to shield an owner from liability for what is in the LLC. LLCs are formed to hold property and ease gifts of shares of that property to family members. That can be done with real estate or other investments.

I agree that Form 1099-INT is not required to be issued by a payer unless that payer is paying the interest in the course of his trade or business. No trade or business, no 1099-INT requirement.

I stand by what I have experienced in my ATX software. I don't know why yours is behaving differently from mine.

Populating the Activities tab in the Sec199A Wkst ATX will show all activities (Sch C, Sch E, Sch F, 1065 K-1 Input, 1120 K-1 Input). If you create an activity after adding the Sec 199A Wkst, the activity will be automatically added to the list. For each activity, check Qualified Business if it qualifies to have QBI. If the activity is also a specified service business, check the Service Business box as well as the Qualified Business Box. The special limitations for specified service businesses will be applied on the QBI Deduction - Service tab before flowing to subsequent tabs. For numbers to flow automatically from K-1 entries, the QBI-related lines on the K-1 input must be completed. For S Corporations, on Line 17, Code V is where QBI is entered, Code W for W-2 wages, and Code X for unadjusted basis. You can enter them in either a service or non-service box. If numbers are entered in the service boxes, it will flow the numbers to the Activities tab and check the Service Business box, but you also have to check the Qualified Business box for numbers to flow into the tabs where limitations are computed. If numbers are entered in the non-service boxes, it will flow the numbers to the Activities tab, but you have to check the Qualified Business box for numbers to flow into the computations. For partnerships, the codes are on Line 20, Code Z is for QBI Income, Code AA is for W-2 wages, and Code AB is for unadjusted basis. Schedule C QBI does not flow into the Activities tab, so you must supply the numbers yourself. The regulations require the Schedule C net income to be reduced by deductions for 1/2 the SE tax, the SE health insurance deduction, and pension contributions made possible by the Schedule C net income. Likewise, for S corporations and partnerships, the QBI that flows into the Activities tab may have to be reduced on the Activities tab by these deductions. Adding Quote from "claycpa" here and hiding his post following this one because this is a NO CHAT topic:

Here's a blog on the Camara decision from October 2017. At the end they discuss what the IRS could do next, but I am not aware of any action taken to date. http://procedurallytaxing.com/tax-court-reverses-course-and-allows-taxpayers-to-change-filing-status/

Have you made sure that the QBI items are entered on the K1 Input (1120S) input sheet? On Line 17, Code V is where QBI is entered, Code W for W-2 wages, and Code X for unadjusted basis. You can enter them in either a service or non-service box. If numbers are entered in the service boxes, it will flow the numbers to the Activities tab and check the Service Business Box, but you also have to check the Qualified Business box for numbers to flow into the tabs where limitations are computed. If numbers are entered in the non-service boxes, it will flow the numbers to the Activities tab, but you have to check the Qualified Business box for numbers to flow into the computations.

On the QBI Deduction Summary tab in the Sec 199A Deduct Wkst , Line 4b subtracts "Net capital gains plus qualified dividends" from taxable income. It pulls those amounts from the qualified dividend line in the return and the net long-term capital gain line. Presumably, in any passthrough such as partnerships and S corps, net capital gain and qualified dividends would be excluded from the computed QBI amount.

I have found the QBI inputs on K-1 screens to flow automatically to the 199a Worksheet on the Activities tab, although the QBI may have to be adjusted by related deductions for SE tax, SE health insurance, etc. Schedule C information does not flow, though, and I think it should, although Schedule C doesn't have a number for W-2 wages or qualified property.

I posted in a thread that to get an activity to show up on the QBI Deduction - Service tab, you have to check both Qualified Business and Service Business.

I created a test return to try it out. On my K-1, the ordinary income on Line 1, the SE income on Line 13, and the QBI on Line 20 (Code Z) are all the same. I don't get the warning gfizer is talking about. Even if I decrease ordinary income below the entered QBI, I don't get a warning about it.

There was a Tax Adviser article on this subject last year, and in the examples they used, the scholarship income was included in the student's income, not the parents'. That can be an even better answer.

In the Form 1120S, right? You can enter the Section 199A income, wages, unadjusted basis, etc. on the tab for Ln 17d, Sch K - Oth Items. There is an equivalent form for QBI entry in the Form 1065 for Line 20.

Gail subtracted the standard deduction because she assumed no other income. The QBI deduction is the lesser of 20% of the QBI or 20% of taxable income. Under Gail's assumption, taxable income is less than the QBI.

Unfortunately, Tax Reform seems to knock this deduction out because it is a miscellaneous deduction subject to 2% of AGI per IRS Publication 529, and all such deductions are disallowed on Schedule A. The IRS is planning to issue regulations on this matter, and they asked for comments from the public in Notice 2018-61. Part of that Notice is excerpted here: The section 642(h)(2) excess deduction may include expenses described in section 67(e). As previously discussed, prior to enactment of section 67(g), miscellaneous itemized deductions were allowed subject to the restrictions contained in 8 section 67(a). For the years in which section 67(g) is effective, miscellaneous itemized deductions are not permitted, and that appears to include the section 642(h)(2) excess deduction. The Treasury Department and the IRS are studying whether section 67(e) deductions, as well as other deductions that would not be subject to the limitations imposed by sections 67(a) and (g) in the hands of the trust or estate, should continue to be treated as miscellaneous itemized deductions when they are included as a section 642(h)(2) excess deduction. Taxpayers should note that section 67(e) provides that appropriate adjustments shall be made in the application of part I of subchapter J of chapter 1 of the Code to take into account the provisions of section 67. The Treasury Department and the IRS intend to issue regulations in this area and request comments regarding the effect of section 67(g) on the ability of the beneficiary to deduct amounts comprising the section 642(h)(2) excess deduction upon the termination of a trust or estate in light of sections 642(h) and 1.642(h)-2(a). In particular, the Treasury Department and the IRS request comments concerning whether the separate amounts comprising the section 642(h)(2) excess deduction, such as any amounts that are section 67(e) deductions, should be separately analyzed when applying section 67. (Emphasis underlined.)

I figured out how the get the QBI for a specified service business to show up on the QBI Deduction - Service tab. On the Activities tab, you have to check both the qualified business box and the service business box. You still have to provide the income for a Schedule C business in the Income/Loss box on the Activities tab. If an S corporation's income needs adjustment from the K-1 reported QBI amount, you would adjust the amount that shows up in the Income/Loss box. I think all ATX needs to do is provide a way to aggregate activities if that is desired.

I agree that the amended return would be one filing. Filing a married joint return after filing with incorrect statuses only available to unmarried taxpayers was permitted in Camara v Commissioner, 149 TC No. 13 (2017). Although the Tax Court ruled that the incorrect filing was not a "separate return", I think you would still use the portion of the Form 1040X instructions under "You are changing from a separate to a joint return" on page 7 of those instructions: You are changing from separate to a joint return. If you and your spouse are changing from separate returns to a joint return, follow these steps. 1. Enter in column A the amounts from your return as originally filed or as previously adjusted (either by you or the IRS). 2. To determine the amounts to enter in column B, combine the amounts from your spouse’s return as originally filed (or as previously adjusted) with any other changes you or your spouse are making. If your spouse didn’t file an original return, include your spouse’s income, deductions, credits, other taxes, etc., in the amounts you enter in column B. 3. Read the instructions for column C to figure the amounts to enter in that column. 4. Both of you must sign and date Form 1040X.

I agree flipping is usually ordinary income subject to SE tax, but I think you could make the case that if a taxpayer only flips one house, they are not carrying on a business and the income classified as capital gain not subject to SE tax.

It seems not to be fully functional yet, but things are set up to flow. You cannot override Line 9 on the Form 1040 where the QBI deduction is taken. If you jump to the source for that number, it takes you to the Sec 199A Worksheet, so the number is supposed to come from there. In my test return, I added an 1120S K-1 worksheet and a Schedule C. Back to the Sec 199A Worksheet, on the Activities tab, both activities are listed. For the S Corporation K-1, the amounts of QBI, wages, and qualified property from the K-1 come over to the Activities tab. There you can designate each activity as a qualified business or a service business. It does not supply a number for the Schedule C business, so at this point, you have to supply it yourself. The net income from Schedule C should be reduced by the SE tax deduction, the SE health insurance deduction, and deductions for retirement contributions to the extent attributable to that activity per Regs. Sec. 1.199A-3(b)(6). Query: if the SE health insurance deduction is allowed from the S corporation, where would that reduction to QBI be entered on the worksheet? At this point, if the activity is classified as a service business, you cannot select it from the dropdown on the activity line of the QBI Deduction - Service tab. However, any activities classified as a qualified business flow the amounts from the Activities tab to the QBI Deduction tab. The QBI for each activity is calculated there. From the QBI Deduction tab, it brings the QBI deduction to the QBI Deduction Summary. The QBI amounts from the activities are compared to 20% of taxable income, and the lower number carries from that Summary to Line 9 of Form 1040. If all else fails, you can override the cumulative QBI deduction from activities on Line 2 on the QBI Deduction Summary in the Sec 199A Worksheet. So it seems ATX still needs to allow activities to flow to or be selected on the QBI Deduction - Service tab. Also on the wish list is a worksheet to subtract required amounts from Schedule C and Schedule K-1 to adjust QBI for an activity. There also seems to be no way to aggregate activities under the election made available by Reg. Sec. 1.199A-4.

Probably because they fall under the taxable income threshold where those factors come into play.

There is no real cite because Congress and IRS regulations have not provided a definition of "Section 162 trade or business." It's a distillation of various court decisions over the years. If you look at the language from the draft Pub 535 quoted earlier, "you must be involved in the activity with continuity and regularity and your primary purpose for engaging in the activity must be for income or profit." The number of properties was my way of showing more involvement than just owning one property, collecting the rent, and doing nothing else. Ultimately, it's a facts and circumstances determination. Investments in REITs and PTPs can qualify because the determination of a qualifying trade or business is made at the entity level. If the REIT or PTP operates a trade or business, the investors can take the deduction. Material participation and active vs. passive don't matter for this purpose. The Sec. 199A deduction can be taken by an owner, even if the owner is passive, if the business is a qualifying business.

Confusion reigns. Yes, a profit motive must exist, but that is not enough. There must be continuous and regular activity. If the owner of rental property regularly provides maintenance services, that might help it qualify. I think the number of properties can impact the trade or business status because the time commitment probably can be pretty much continuous and regular with many properties. Maybe even regularly searching for new properties to purchase and rent out can provide the necessary level of involvement.