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emc011075
emc011075, Tax adviser
Category: Finance
Satisfied Customers: 2928
Experience:  IRS licensed Enrolled Agent and tax instructor
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I have interest income from a US lending income fund, and

Customer Question

Hi
JA: Hello. How can we help?
Customer: I have interest income from a US lending income fund, and they sent me a schedule K-1 (form 1065). the form reports "interest income" and then "portfolio deductions" and "unrealized charge offs" and then "total to schedule k-1, item L"
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: my question is do I report the total to schedule k-1 as my taxable interest income on my federal income tax return
JA: Is there anything else important you think the Accountant should know?
Customer: that's it also, I was living outside of the US for the whole year last year (this is for my 2015 return)
Submitted: 8 months ago.
Category: Finance
Expert:  emc011075 replied 8 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Item L is for informational purposes. What's in boxes 1 - 20?

Customer: replied 8 months ago.
box 5 has 60,110. box 11 (loss) has -7,919. box 14 (other deductions) has 4,370. box 20A has 52,191. box 20b has 4,370
Customer: replied 8 months ago.
total to schedule k-1, item L is 45,207
Customer: replied 8 months ago.
the k-1 says "individuals should enter portfolio deductions shown on line 13k as misc expenses on schedule A"
Customer: replied 8 months ago.
I would guess I report 45,207 as my taxable income correct?
Expert:  emc011075 replied 8 months ago.

No. Box 5 is interest income, that goes on Schedule B.

What's the code in box 11?

Box 14 is Self-employment earnings, I guess you mean box 13. This will go on Schedule A as investment expense. But this is not enough to itemize, so unless you have more deductions, it will probably not benefit you much.

Customer: replied 8 months ago.
sorry yes box 13 is 4,370. box "11F" is other income (loss)
Expert:  emc011075 replied 8 months ago.

By the way, you live outside US but are you US citizen or green card holder?

Customer: replied 8 months ago.
the full year "increase" was 45,207, so I would assume that's my taxable income
Customer: replied 8 months ago.
live outside the US but I am a US citizen
Customer: replied 8 months ago.
pls see the attached
Customer: replied 8 months ago.
this was my only income the whole year
Expert:  emc011075 replied 8 months ago.

not exactly. You have to break it down and you may not be able to deduct everything. L is not your net income. It is status of partnership capital accounts. Sort of like your partnership Net Worth.

Thank you for the upload. It helps. Give me few minutes.

Expert:  emc011075 replied 8 months ago.

All right. Box 5 is your total interest income that is reduced by box 11F and the total is in box 20a. On your schedule B you will have 2 lines:

first line: K1 interest income = 60,110

second line: K1 charge off losses = -7,919

You can deduct 13K on schedule A but if this is your only income (keep in mind that you are required to report your worldwide income), you will not have enough to itemize so it will not benefit you.

Customer: replied 8 months ago.
ok. I'm using H&R block's online service, so I should just list 52,191 as my interest income?
Expert:  emc011075 replied 8 months ago.

The software should allow you enter the entire K1 line by line. Look for business section and let the do it for you. Do not just enter net interest income because the IRS software will not be able to match it with the K1. You have to break it down as on your k1.

Customer: replied 8 months ago.
there's no option to enter K-1 data, just an option to enter interest income, form 1099
Expert:  emc011075 replied 8 months ago.

no, 1099 is not K1. You may need to get different version. Are you using the online free version?

Customer: replied 8 months ago.
Expert:  emc011075 replied 8 months ago.

The free version will not support k1 because it does not have certain forms. It will report the interest as bank interest and the IRS software will not be able to match it, which means you will get an under reporting notice. You will have to do it on paper or get different software or version.

Expert:  emc011075 replied 8 months ago.

Here are forms and schedules supported by HRB online: https://www.hrblock.com/pdf/HRB-Online-Fed-Forms.pdf You need at least the Deluxe version.

Customer: replied 8 months ago.
why Deluxe? the Basic version has the k-1
Expert:  emc011075 replied 8 months ago.

Does it? If it does than use the Basic. I clicked on the "Have investment" tab on the top and it only showed me Deluxe version.

https://www.hrblock.com/online-tax-filing/

Expert:  emc011075 replied 8 months ago.

Just called HRB online support and was told that the Basic supports K1s. It is not considered an investment.

Is there anything else I can help you with today?