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QBI Passive Op Loss Must be entered

Forum|Forum|5 years ago
February 22, 2021
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Hi,

We bought a vacation rental property in Dec 2019 and reported a loss. We have carryover loss of -722. For 2020, we have a much bigger loss. I entered all the information correctly for income, expenses, and assets. Now, I'm ready to file and I'm getting this error message. In looking at the form, it shows two columns for 2019 "Regular Tax" and "QBI." Turbotax already has -722 entered under Regular Tax so I guess it wants me to put a number under QBI, but I don't know what to put. Since it's next to 2019, I'm guessing it's a 2019 number, but if so, why didn't TT auto fill it from my data?

Thanks,

Marie

TurboTax Home & Biz Windows

Best answer by Mike9241

QBI is only for trades or businesses. rental property is an issue as to whether its a trade or business or not. realistically, I would find it hard to see a property that is a vacation rental as rising to the level of a trade or business. if you agree that it's not a trade or business enter 0 for QBI. taking a position it is not would likely carry forward to future years. if you treat it as a trade or business and in any year there is a cumulative profit (all years as rental) you would be entitled to the QBI deduction but then you have to enter into Turbotax the 2019 net loss as the QBI loss carryforward. Most likely in 2019 you took the position if was not a trade or business otherwise Turbotax would have carried it forward to 2020

the IRS has issued revenue procedure 2019-38 for safe harbor election. those that meet its criteria attach the election to their returns(every year) and thus they can treat their rental properties as a trade or business without worry that the IRS will say its not. read section .03 in the link provided. nothing requires a taxpayer to use the safe harbor but then if they take the position their rentals are a trade or business, the IRS can successfully challenge based on the facts in each case

https://www.irs.gov/pub/irs-drop/rp-19-38.pdf

M

Mike9241Answer

QBI is only for trades or businesses. rental property is an issue as to whether its a trade or business or not. realistically, I would find it hard to see a property that is a vacation rental as rising to the level of a trade or business. if you agree that it's not a trade or business enter 0 for QBI. taking a position it is not would likely carry forward to future years. if you treat it as a trade or business and in any year there is a cumulative profit (all years as rental) you would be entitled to the QBI deduction but then you have to enter into Turbotax the 2019 net loss as the QBI loss carryforward. Most likely in 2019 you took the position if was not a trade or business otherwise Turbotax would have carried it forward to 2020

the IRS has issued revenue procedure 2019-38 for safe harbor election. those that meet its criteria attach the election to their returns(every year) and thus they can treat their rental properties as a trade or business without worry that the IRS will say its not. read section .03 in the link provided. nothing requires a taxpayer to use the safe harbor but then if they take the position their rentals are a trade or business, the IRS can successfully challenge based on the facts in each case

https://www.irs.gov/pub/irs-drop/rp-19-38.pdf

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culebracasitarentalsAuthor

Thank you so much, Mike9241!

That answered my question completely. In reading about whether we are or might be in the future a qualified trade or business, all I saw was the insane amount of record keeping. We're happy without qualifying. I put 0 on the 2019 QBI column that TT was asking for.

Thanks again,

Marie

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James16

I think SRH3's comment above regarding the error in TT is correct. I have a K-1 that had 2018 and 2019 QBI losses. TT 2020 comes up with an error saying it is missing the 2019 QBI loss carryover amount. But when I look at the form it looks like TT is adding the 2018 and 2019 numbers together and putting the total into 2018 and leaving 2019 blank rather than putting 2018 in 2018 and 2019 in 2019. This is still the case as of 26-Mar-2021, after updating TT Home & Business. When I manually change the 2019 number to the carryover number from my 2019 return, the 2018 number recalculates to the correct number for 2018. If you did your 2018 and 2019 taxes using TT Home & Business you should be able to go back and find the 2018 and 2019 QBI carryover numbers. Putting in the correct 2019 number should adjust the 2018 number to the correct number -- I would check both numbers.

NOTE: I am not a CPA or tax professional so I am not attempting to give any tax advice.

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DSOVa

I am using Premier and having the same problem in entering information for a limited partnership (business) on Sunday, March 28, 2021.

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paulhart

After pouring through my 2019 return, I eventually found that, in my case, the 2019 QBI Passive Op Loss number was the same as 2019 total loss number TurboTax entered next to the missing number on the 2020 return. In some cases, it might be different, but it wasn't.

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Diana46

Problem: Federal Review is asking for Schedule E QBI Passive Operating Loss and Passive Operating Loss but does not indicate which fields are missing.

Solution: Probably zero (0).

I worked with two specialists and an expert this evening to interpret what appears to be a coding bug. In the rental property sales carryover section, Passive loss and QBI deduction ask for a by-year value to be entered. If the total loss spans multiple years, and some of the loss is from prior to 2018, one should be able to enter 0 (zero) in the 2018 & 2019 fields, however, the page will not accept the value zero.

During the Federal Review, I was redirected to check the values for the Schedule E form to fill out the Passive Operating Loss and QBI Operating Loss, yet, there are no fields with these titles and it was unclear what to complete (no fields were being highlighted by the system to indicate what is missing). When I entered a value, the next message indicated that the number could not be greater than zero. I entered a negative value (I suspected this was incorrect) and clicked Continue. I was greeted with a Success message that didn't feel accurate. So I navigated back to the original Carryover section and confirmed my suspicions; the original entry is not allowing zero, yet the form is requiring zero in the 2018 and 2019 fields. I corrected the values I had changed in the Federal Review, left 2018 and 2019 blank, returned to the Federal Review section and added zeros when prompted for the missing values.

I believe this is a bug and will cause folks to enter an incorrect value. Hopefully, mine is correct.

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ppumgrad

It is a bug. There were two other discussions where a TurboTax "expert" said a fix to the bug was going to be released April 8 (links below). But after the release, I discovered and reported it was only partially fixed, which means it wasn't "fixed". Of course, after that, the "expert" was no where to be found. So I tried to manually enter what I thought were the correct QBI entries while entering my K-1's. But then I ran into the same problem you did during the final review portion and could not figure out what Schedule E fields they were talking about. I spent a couple hours filling in a field here and there, then seeing how the resulting Schedule E would look, to figure out which fields corresponded to which in the form. Every time I'd get the error, and TurboTax would say my options were either fix the fields or submit a paper return. So I gave up and went back to leaving the incorrect data that TurboTax initially populated. The resulting QBI loss carryover in the Schedule E looked okay and my return was accepted, but I know there's wrong data in there, but I got tired of messing with it and nobody from TurboTax chimed in.

https://ttlc.intuit.com/community/taxes/discussion/qbi-carryforward/00/2092446

https://ttlc.intuit.com/community/taxes/discussion/potential-bug-qbi-carryover-loss-not-populating-properly/00/2550357

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drspock11

Now it's 2023 and this bug still is not fixed. And multiple "experts" from TurboTax don't even seem to know what QBI even is. Intuit is beyond incompetent.