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QBI Deduction in ATX - Software question


BulldogTom

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I see the Sec 199 worksheet is now available.   Working on a schedule C for a client and the deduction is not calculating or flowing.   I played around with the worksheet, but I could not get the Sch. C profit to flow to the worksheet.   When I entered the schedule C profit directly on the form, it calculates and flows tot he 1040.   

Am I doing this correctly?   Shouldn't the amount of profit from the Schedule C populate the Sec 199 worksheet?   Did I miss a step somewhere?

Thanks

Tom
Modesto, CA

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In simple terms a Qualified Business is a pass through entity that qualifies for the deduction.   A service business is a Specified Service Trade or Business as defined in the TJCA.   The first box means you can take the deduction, the second means that if you exceed the income limits, the deduction may be phased out or eliminated.

Hope this helps.

Tom
Modesto, CA

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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.

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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.

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  • 1 year later...

Dawn,

In the S corp return, there's a new tab under 1120S, "199A Activity Summary".  There will be listed an 1120S activity, with an opportunity to add more.  At the top of the form is a Check ('X") if Qualified Business.  If you check that box, numbers will flow to the K-1s.  If it is also a Specified Service Trade or Business, check that box also.  Most of the input should flow from 1120S, but you may have to supply a Section 199A W-2 wages number and/or a Section 199A unadjusted basis number.

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