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I have always checked the Material Participation box in the

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past. When I do that...
I have always checked the Material Participation box in the past. When I do that for 2015 it is reducing my refund? Why is this happening? Do I need to change some setting somewhere in Turbo Tax?
Submitted: 1 year ago.Category: Tax
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Answered in 22 minutes by:
10/14/2016
Tax Professional: emc011075, Tax adviser replied 1 year ago
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,243
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

What participation box are you talking about? Schedule E, Schedule C or something else?

Also can you preview the return and tell me what is changing? Your AGI? Your deductions or credits?

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Customer reply replied 1 year ago
Material participation is checked for 2015 as it was for 2014 and the previous years.This question is related to Schedule E. For some reason I did not have Schedule E Material participation checked. When I checked the refund number at the top of TurboTax went down. I don't know what it changing internally. All I know is that gross refund is changing.
Tax Professional: emc011075, Tax adviser replied 1 year ago

It could be several reasons. Where the income on Schedule E is coming from? Rental income or K1? What's the Schedule E outcome? Profit or loss?

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Tax Professional: emc011075, Tax adviser replied 1 year ago

The refund could change because your AGI increased, type of income/loss has changed, higher AGI changed your deduction or disallowed a credit, or if the income on Schedule E is from partnership K1 it could be self-employment tax.

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Customer reply replied 1 year ago
The K1 income is negative. I don't think it is going through Schedule E. Also, the Schedule E is not going through Schedule C.
Customer reply replied 1 year ago
Clarification:The K1 income is negative. I don't think that the K1 income is going through Schedule E.Also, the Schedule E is not going through Schedule C. Why not?
Tax Professional: emc011075, Tax adviser replied 1 year ago

K1 always goes through Schedule E and schedule E never goes through schedule C. Schedule C is for profit and loss from business. If you have K1 income, it is from corporation or partnership.

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Tax Professional: emc011075, Tax adviser replied 1 year ago

What type of K1 do you have and what's reported on it? K1 usually reports more than just one item.

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Customer reply replied 1 year ago
K1 is from S Corporation. It is showing loss from passive activity.
Tax Professional: emc011075, Tax adviser replied 1 year ago

What is exactly reported on your K1 line 1 through 20? Can you upload it? Do you have anything else on Schedule E beside the K1 income? It may not be the K1 that is changing your refund.

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Customer reply replied 1 year ago
There are two of them exactly like this because there are two partners in the corporation, me and wife.
Tax Professional: emc011075, Tax adviser replied 1 year ago

this does not show how it affects your income. It is not the self-employment tax so it must be your AGI or one of the credits or deductions claimed. But without a return or at least know how it is changing the return is hard to say. There could be dozen of reason why. Tax return is a complex set of calculations and change in your income or type of income can affect several deductions or credits, or even generate certain penalties.

I am sorry. I do not know. I will opt out and have somebody else help you.

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Tax Professional: PDtax, Certified Public Accountant (CPA) replied 1 year ago
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4,714
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified

Hi from Just Answer. I'm PDtax. Since the first expert opted out, I can assist.

The best way to assist is to review the return you prepared. I'll make an Offer to assist.

Since the filing deadline is coming up, I ask that my Offer be accepted or rejected by 12:00 noon EST so I have time to receive your return pages, review the issue, and advise, this afternoon.

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Tax Professional: PDtax, Certified Public Accountant (CPA) replied 1 year ago

I looked at the Turb**** K-1 worksheet you posted, and I see some of the reasons for your errors. Just not all.

Since I really need to review the rest of the return to see the second half of your filing errors, and my noon EST deadline was not met, I will opt out.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago
ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 714
Experience: Business Consultant/Accounting Manager
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Hi. Just saw the expert opt out. Do you need any help with this? Thank you.

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Customer reply replied 1 year ago
Can you help with this issue?This is what I have gathered so far.My K1 is passive--that is no material participation--income.My Scheduled E rental income was entered as no material participation.If I check the material participation in Schedule E then my tax liability increases.I am trying to figure out if passive loss in K1 is offestting passive gain in Schedule E?I have a hunch that this is what is going on as if I reduce my expenses thus increasing the net income in Schedule E the tax refund does not increase.However, if I check material participation (active income) then the tax refund is reduced.
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

Hi. Just want to confirm. Is the Schedule E (rental property) business separate from the business reflected on the K-1? Thank you.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

If you did not mark the material participation option on your Schedule E, you can use passive losses against passive income. If you marked material participation in Schedule E - your passive losses cannot be used, since Schedule E income would be considered ordinary income.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

I have just received your attachments - the answer is above. Let me know if you have any questions.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

Let me know if you have any questions. Thank you.

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