Qualified business income deduction calculations and troubleshooting (1065)

Alerts and notices

Use this article to determine how and where the Qualified Business Income is calculating and how to correct any QBI amounts you disagree with. If you are looking for information on how to enter QBI information, see the Qualified business income for pass-through entities overview.

Calculations

Where does my QBI calculation appear in the return?

Partnership’s Section 199A Information Worksheet

This worksheet lists each activity’s qualified business income, W-2 Wages, and qualified property when you enter 1 in the Qualifies as trade or business for section 199A field on Screen QBI in each applicable activity. It appears as the last tab for each schedule in Form View.

Note: The worksheet does not include activities that does not have this field marked in Screen QBI.

Tax Projection Worksheet – Qualified Business Income Worksheet

This worksheet is generated using the Screen QBIProj in the Review folder. If a field is blank and is not denoted with an asterisk (*), the application uses the amount from the 2018 Schedule K. This worksheet appears in the QBIProj folder in Form View.

Where does the Qualified Business Income show on my partner’s Schedule K-1?

The QBI information appears on the Schedule K-1, box 20 with codes Z, AA, AB, AC, and AD. When data sharing to a 1040 return from a 1065 return, these fields populate Screen K1-7 in the 1040 client.

Also included with the K-1 is a Partner’s Section 199A Information Worksheet that breaks down the activities and amounts appearing on the K-1, box 20. This worksheet is in the Ptr folder in Form View, on the Qualified Business Income tab.

Troubleshooting scenarios

Assets

  • Access the Asset Module within the activity, go to Setup > Activity, and answer Yes to the Qualifies as trade or business for Section 199A field. For specific assets that do not qualify as Section 199A, go to the Other tab within the asset and mark the Exclude asset from qualified business income deduction field.
  • If all information except Qualified Property appears on the worksheet, such as the activity name and qualified income, try the following:
    1. Go to Screen QBI in the related activity and remove the data on the screen by choosing Edit > Delete screen data.
    2. Open the Asset tab within this activity to re-initiate the Qualified Property amount datashare to the QBI screen.
    3. Go back to the QBI screen within the activity to verify the Qualified Property amount is populated from the asset module and add back any missing information to this screen.
    4. Open the Section 199A Information Worksheet to verify the Qualified Property now appears.

The Exclude asset from qualified income deduction checkbox is only available for assets that qualify for the Qualified Business Income Deduction (QBID). Assets qualify if they meet one of the following criteria:

  1. It has been 10 years or less from the date it was placed in service, or
  2. It has been greater than 10 years the asset was placed in service, but the asset is still within its recovery period, or the last full year of the recovery period.

Verify that at least one activity has the Qualifies as trade or business for Section 199A field marked in the activity’s Asset tab, in the Setup > Activity screen.

In the assets in question, you can use the Basis for business income deduction (force) field to specify how much basis should be used for each asset as needed. The amount that you enter here will be used as the cost basis on the Qualified Property report, and it will also change the amount that the tax return uses if you are using UltraTax CS. This field is available when you mark the that the activity qualifies as a trade or business for Section 199A under Setup > Activity.

Miscellaneous

This diagnostic appears when an activity is populated at all and does not have an answer on the Screen QBI, Qualifies as trade or business for section 199A field, including the Income & Deductions folder, Screen QBI. This diagnostic does not prevent e-filing, but the field is crucial to the calculation of the Section 199A if the property qualifies.

These worksheets will print when you enter 1 in the Qualifies as trade or business for section 199A field on Screen QBI for at least one activity.

This information can be input in either the K1 1065, 1041 folder, Screen K1-3, on field Domestic production activities deduction from cooperatives or the Farm folder, Screen QBI, using the Cooperative’s QPAI deduction alloc to patron and identified in writing by cooperative field and can be specially allocated to partners.

The custom paragraph prints in the main return filing instructions when you select the custom paragraph Sign Section 199A Safe Harbor Stmt (FI) on the Letter screen in the General folder.

Verify that each activity with a Screen QBI in use contains a Description at the top. Without a Description, the QBI Worksheets cannot accurately sort and label the QBI items on the worksheets.

View the Not Required statements for the return for additional information, such as additions or subtractions added to the QBI amounts because of another form's instructions, carryovers, etc. You can view these statements by clicking the Form View button's drop-down arrow at the top of the application and select Statements.