Schedule K-1 199A Preparation Requirements for Partnership with Only C-Corp Partners

Thank you for the answer! Just to clarify - will the IRS system flag anything if I leave that section blank on the K-1s? Also, is there somewhere specific in the instructions that states this is optional for C-Corp partners? My manager is picky about documentation for these decisions.

The IRS system won't flag anything if you leave the 199A section blank when your partners are all C-Corporations. This is because the system recognizes that C-Corps don't need this information. The instructions for Schedule K-1 (Form 1065) specifically state that the 199A information is provided to partners "so they can figure their deduction under section 199A." Since C-Corporations are explicitly excluded from taking the 199A deduction, there's no requirement to provide this information to them. You can reference the Form 1065 instructions and Section 199A regulations (1.199A-6) which outline who needs the information to substantiate your decision to your manager.

How exactly does taxr.ai help with this? I've got a similar situation but with a mix of partners (some individuals, some C-Corps). Does it tell you which K-1s need the 199A info and which don't?

I'm skeptical about using third-party tools for tax research. Couldn't you just read the actual IRS instructions? Seems like adding an extra step that might introduce errors. How do you know if it's interpreting the regulations correctly?

The tool specifically helps by analyzing the regulations and instructions regarding 199A reporting requirements. It searches through the technical language and provides clear guidance on which situations require the information and which don't. For your mixed partner situation, you would only need to complete the 199A section for partners who can actually take the deduction - so individuals, trusts, estates, and pass-through entities. You can skip it for the C-Corp partners. The tool helps identify these distinctions and cites the specific regulations. I understand the skepticism - I felt the same way initially. But what I found useful is that it actually shows you the exact sections of the regulations it's referencing and explains how they apply to your situation. It's not replacing reading the instructions, it's making them more accessible and contextual to your specific question. I still verified everything against the official IRS publications.

Wait, how does this actually work? The IRS phone system is notorious for disconnecting calls. Does this service somehow keep your place in line if that happens?

This sounds too good to be true. The IRS phone system is completely broken - I tried calling 8 times last year about a business credit issue and never got through. If this actually works, it would be a game changer, but I'm extremely doubtful any service can fix the IRS phone issues.

The service connects to the IRS phone system and navigates the menu options for you, then stays on hold in your place. When a representative finally answers, the system calls your phone and connects you directly to the agent. So you don't have to wait on hold yourself. Yes, it absolutely handles disconnects and system issues. If the call drops, they automatically redial and get back in the queue without you having to do anything. That's actually one of the most valuable aspects - the persistence when dealing with the notoriously unreliable IRS phone system. I was skeptical too! The IRS phone system is completely frustrating - I've had the same experience of never getting through. What convinced me was when a colleague showed me the text updates he was getting about his place in line. The service kept trying even when the system hung up multiple times. When it finally connected, he got a specific revenue agent who was able to resolve his issue. Not saying it's magic, but it actually does make the impossible possible when you need to speak with the IRS.

Do you think this applies to foreign corporate partners too? We have several foreign corps as partners and I'm not sure if the same rules apply or if there's some international reporting requirement I'm missing.

For foreign corporate partners, the same principle applies regarding the 199A information - they don't need it because foreign corporations (like domestic C-Corporations) aren't eligible for the QBI deduction. However, be very careful with foreign partners because there are completely different reporting requirements you need to consider. Make sure you're addressing withholding requirements on effectively connected income, completing Forms 8805 if applicable, and considering any treaty provisions. The 199A information is the least of your concerns with foreign partners - focus on the withholding and reporting obligations instead.

I use ProSystems too and had the same issue. What worked for me was putting zeros in all the 199A fields rather than leaving them blank. The software accepted that and didn't throw any errors. Just make sure you've properly identified each partner as a C-Corporation in the partner information screen.

Thanks, that worked perfectly! I tried putting in zeros instead of leaving them blank and the diagnostic errors went away. Seems like a software limitation rather than an actual requirement, but at least there's a workaround.

Great questions! In my experience, C-Corp clients rarely ask about the missing 199A information because their tax preparers typically handle the K-1s and understand that C-Corps can't use the deduction anyway. The few times I've had to explain it, I just mention that the 199A deduction is only for individual taxpayers and pass-through entities, so C-Corporations don't need that information on their K-1s. Regarding future changes - I haven't seen any proposed regulations that would change the 199A reporting requirements for C-Corp partners. The fundamental issue is that C-Corporations are subject to their own tax rates and aren't eligible for the individual QBI deduction, so there's no logical reason they would need this information in future years either. The 199A deduction itself is currently set to expire after 2025 unless Congress extends it, but even if they do extend it, I can't imagine they would make it available to C-Corporations given how the corporate tax structure works.