Level 7

Question

QBI deduction

Forum|Forum|2 years ago
October 26, 2023
4 replies
59 views

Hi to all. Client has 1120-S, k-1 and also has a side job received 1099-NEC under his name( not S-Corp) should file sch C for him.

Sch C has net income and K-1 has numbers on box 17 code V for section 199A ordinary income but does not have Wages( Did not have distribution so did not have wage for sole shareholder and no employees) and UBIA. Also, both business are non-SSTB.

I this case for QBI deduction 8995, BOTH ordinary income from S-Corp and net income of sch C (minus 1/2 SE tax minus ... )should go on 8995?

I would greatly appreciated it for any help.

ProSeries Professional

This topic has been closed for replies.

Jim-from-Ohio

Intuit Community Champion

Both businesses qualify for QBI. on top of schedule C there is a box to activate the QBI for that particular venture. On the K-1 you have to manually enter the QBI information for the S Corrp at that quick zoom link. The program should take compute the QBI properly.

HOPE2Author

Level 7

Thanks Jim. If we open up 8995 you mean we can see two numbers one for Sch C and the other for K-1 of S-Corp ? Am I right?

Jim-from-Ohio

Intuit Community Champion

yes.. two figures on the 8995

D

Dusty2

Level 6

@HOPE2 I know that you did not ask this question but:

"To prevent S corporations and their shareholders from avoiding payroll taxes by maximizing distributions and minimizing compensation payments, the IRS requires S corporations to pay shareholders who provide substantial services reasonable compensation."

BobKamman

Level 15

Actually, the IRS doesn't require anything. The laws passed by Congress require S corporations with a profit to report a reasonable amount of those as compensation subject to payroll taxes. An S corporation with a loss does not have to add to it by paying a salary to its owner. Likewise, an S corporation with a $25,000 profit doesn't have to pay $50,000 to its owner just because she had a bad year. The law requires IRS to enforce the laws that have been enacted. If there is a disagreement about what the law requires, the IRS is required to follow the rulings of the judicial branch.

I'm fairly sure @HOPE2 knows all this, so we should probably just MOOB.

HOPE2Author

Level 7

Thanks @BobKamman for description of me.

How about my question?

D

Dusty2

Level 6

@HOPE2 So, in your original post you said "Did not have distribution so did not have wage for sole shareholder and no employees", did they have a profit? If so did they pay themselves a salary as they are required to?

Dusty

HOPE2Author

Level 7

My question is about QBI, but in S-Corp when you do not have enough cash to pay yourself paystub so you are not allowed to take distribution. Net income just has FED tax.

qbteachmt

Level 15

"Did not have distribution so did not have wage for sole shareholder and no employees"

Everyone is pointing out this is backwards. I hope that isn't one of the statements you are arming yourself with for purposes of guiding clients.

Or, you are explaining that the person took no money, so that also means no paychecks? Because distributions are never payroll and not in lieu of payroll. Payroll is primary. Having a paper loss would not preclude payroll, either.

Because Yes, there is an employee. Your Shareholder is the employee, if they are doing the work of the business.

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