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QBI adjustments for tax credits

Technical topics regarding tax preparation.
#1
Posts:
77
Joined:
23-Jan-2015 11:10pm
Location:
michigan
On a Form 1120S for 2018, ordinary business income is $50,000 on line 1 of Sch. K. Line 13 of Sch. K shows a Form 8826 Disabled Access Credit of $5,000 and on line 16 of Sch. K there is shown non-deductible expenses of $5,000 since we are taking the credit. Proseries is showing QBI as $50,000 and not reducing it by the $5,000 credit. I assume this is correct and I don't have to adjust the 199A amount down to $45,000 as I can find nothing that talks about a reduction being necessary when a tax credit is taken instead of the expense for an item. I did make a Schedule M adjustment since I wrote down the ADA asset improvement account on the books so as not to double dip later if the improvement or the business was sold. Is Proseries correct in using $50,000 for QBI even though my M-1 adjustment reflects a book income of $45,000? Thanks for any comments.
 

#2
Posts:
77
Joined:
23-Jan-2015 11:10pm
Location:
michigan
Since the above post will affect many of us with clients who have tax credits, has anyone thoughts on whether QBI has to be reduced for the amount of the credit taken? Again, Proseries does not reduce QBI for the amount of the tax credit. That would be fine with me if that is the case. I just don't want to see a return that affects many shareholders bounced back by the IRS. Thanks in advance.
 

#3
Posts:
1130
Joined:
22-Apr-2014 1:34pm
Location:
North Carolina
I don't know the answer, as I have not seen anything mentioning tax credits and QBI. I just did a return with a credit and Ultra Tax did not reduce it either. However, I don't think many (if any) of the software is handling 199A correctly at this point.
 


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