Filing K1 for MLP (Energy Transfer) - Confused about partnership breakdown for Turbotax

Thanks for confirming I'm at least partially on the right track! The questions that threw me off were about "publicly traded partnerships" and something about "multiple activities." Then it asked if I had disposed of my entire interest in the partnership, which I haven't. Then there was another section asking about Section 751 gains that I don't remember from last year. I'm wondering if I need to check these boxes or if they're just asking because the software doesn't know what kind of K1 I'm entering yet?

Yes, those questions are normal for MLP entries in TurboTax. Energy Transfer is indeed a publicly traded partnership, so you should select "yes" for that question. For the multiple activities question, you should also select "yes" since ET has multiple business activities across its structure, which is reflected in the breakdown you mentioned. For the question about disposing your entire interest, since you haven't sold all your units, select "no." This question appears because special tax rules apply when you completely exit an MLP investment. The Section 751 gain question relates to what's sometimes called "hot assets" that get special tax treatment when sold. If you haven't sold any units, this wouldn't apply to you. The software is just covering all possible MLP scenarios, which is why you're seeing questions that may not be relevant to your specific situation.

Does it work with other tax software too? I use H&R Block and have similar problems with my ET and EQT partnership K-1s every year.

I'm a bit skeptical about using a third-party site with my tax info. How secure is it? Do you have to give them your entire return or just the K-1?

It absolutely works with H&R Block and pretty much any tax software. The instructions it gives are generic enough that you can apply them to whatever program you're using. The analysis breaks down each box and explains what it means regardless of which software you enter it into. You only need to upload the K-1 itself, not your entire return. The site uses bank-level encryption for uploads and doesn't store your documents after analysis (according to their privacy policy). I was concerned about that too initially, but the K-1 is already a document that was sent to the IRS anyway, so the sensitive information exposure is minimal compared to uploading a full tax return.

How long did it take for them to actually get you connected to someone? I'm filing kind of last minute and don't have days to wait...

This sounds like a scam. Why would I pay a service to call the IRS when I can just call them myself? Has anyone else actually used this or is this just marketing?

For me it took about 2 hours total, compared to the multiple days I spent getting disconnected when trying myself. They basically hold your place in the queue and call you when they're about to connect you. Much better than sitting on hold listening to that awful music for hours! I understand the skepticism - I felt the same way at first. But the service just automates the hold process. You still talk directly to the IRS yourself. They don't get involved in your tax situation at all. They just handle the horrible hold time problem and then connect you directly once there's an actual human on the line.

What happens if your basis does go negative? I've had ET for about 7 years and I've never tracked the basis changes. Do I need to go back and fix previous tax returns or just start tracking now?

If your basis goes negative, those additional reductions actually become taxable as capital gains in the year they go below zero. The IRS considers this a "deemed sale" even though you haven't actually sold the units. You don't need to amend previous returns for not tracking basis - the reporting of basis adjustments on your tax returns was correct if you properly entered the K-1 information each year. What you do need to do is reconstruct what your current basis is by reviewing all your past K-1s, purchase records, and any sales you've made. Start with your original purchase price, then for each year, reduce the basis by the tax-free portion of distributions (usually shown in Box 19A of the K-1 as "distributions in excess of income") and increase it by any income allocated to you that you paid tax on. It's tedious work, but essential for when you eventually sell.

The worksheet is helpful but you absolutely need your ending basis from the previous year to use it properly. If you used TurboTax last year too, you might be able to find that number in last year's return - look for Form 8949 or the Partnership section. If you can't find it, you'll need to recalculate from when you first purchased the MLP units. It's a pain but necessary to get accurate tax treatment, especially if you plan to sell any units in the future.

Thanks for the tip. I managed to find last year's form and get the ending basis. The worksheet does make it easier to keep track year to year. I just wish TurboTax would automatically carry this information forward instead of making me hunt for it every time!

This is really helpful advice about checking for amended K-1s! I actually didn't realize Energy Transfer sometimes issues corrections. Is there a specific place to check for these, or do they just mail out replacements? Also, regarding the EINs for each entity - I've been using the main ET EIN for all three partnerships because I wasn't sure where to find the individual ones. Are the separate EINs clearly labeled on the breakdown page, or do I need to look elsewhere on the form? I'm definitely feeling more confident about entering these as separate partnerships now, but want to make sure I'm using the right identification numbers for each one. Thanks for all the detailed guidance everyone!

For amended K-1s, Energy Transfer typically sends them by mail if there are corrections, but you can also check their investor relations website under "Tax Information" for the most current versions. They usually post any amendments there with clear dates showing when they were issued. Regarding the EINs - you're right to be confused about this! On the breakdown page, each partnership entity should have its own EIN listed, but sometimes it's not super obvious. Look for a section that shows something like "Partnership EIN" or "Employer ID" for each of the three entities (ET, USAC, SUN). If you can't find separate EINs clearly listed, you might need to use the main ET EIN for all three entries, but definitely double-check the form carefully. If the EINs aren't clearly separated on your breakdown page, that might be one of those questions worth asking the IRS about directly, since using the wrong EIN could cause matching issues later. Better to get it right the first time than deal with notices later!

This is a great point about the Section 199A deduction! I completely forgot about this when I was dealing with my ET K-1 last year. I think I might have missed out on some tax savings because I wasn't paying attention to Box 20. For someone new to MLP investing like me, can you clarify - does the 199A deduction apply to each partnership entity separately, or is it calculated on the combined income from all three (ET, USAC, SUN)? I want to make sure I'm not double-counting or missing anything when I enter these as separate partnerships in TurboTax. Also, are there any red flags I should watch for that might limit my ability to claim this deduction? I've heard there are income thresholds but I'm not sure exactly how they work with partnership income.