Article Posted on 05/15/2019
Q. I got a Schedule K-1 from a partnership that omitted the information I need to calculate my 199A deduction.
What do I do?
You have a big problem. Without a properly completed Schedule K-1, your Section 199A deduction is $0. Unfortunately, tax reform’s Section 199A deduction often confuses small-business owners and tax professionals alike. Add to that fact the regulations from the IRS have been late getting out.
Best option: You should request a corrected Schedule K-1 from the entity giving you the Schedule K-1 so you have the information you need to calculate your Section 199A deduction.
Not-so-great options: If you can’t get a corrected Schedule K-1, you have two options:
- Take no Section 199A deduction.
- File Form 8082 with your tax return and claim the Section 199A deduction.
You file Form 8082 with your tax return when you take a position on your tax return that is inconsistent with the Schedule K-1 you received.
Since the final regulations presume the Section 199A amounts are $0 when omitted, it is possible Form 8082 can rebut that presumption. The truth is, we do not know for sure.
You can determine qualified business income, but not W-2 wages or unadjusted basis immediately after acquisition of qualified property, from the other information on the Schedule K-1. Therefore, the Form 8082 option is likely available only if you are under the Section 199A taxable income threshold ($315,000 on a joint return or $157,500 for all other filing statuses).
Amended return. If you did not take a Section 199A deduction and you eventually get a corrected Schedule K-1, you can claim the deduction on an amended return and obtain a refund.