Schedule K-1 Box 13 Code W - where do I enter this extraordinary loss deduction?
I'm currently working through my taxes and I've hit a roadblock with my Schedule K-1. In box 13, I've got about $3,800 with code W (other deductions) that's classified as an 'extraordinary loss'. My tax software is telling me I need to enter this somewhere else in my return, but it's not giving me any direction on where exactly this should go. I've searched through the different forms but can't figure out the right place for this deduction. Has anyone dealt with an 'extraordinary loss' on a K-1 before? Where am I supposed to report this so I don't miss out on the deduction?
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Dmitry Smirnov
The "extraordinary loss" with Code W in Box 13 of your Schedule K-1 would typically be entered on Schedule A if you're itemizing deductions. It falls under the miscellaneous itemized deductions category, but here's where it gets tricky - these deductions are subject to the 2% AGI floor, which means you can only deduct the portion that exceeds 2% of your adjusted gross income. However, some extraordinary losses might qualify as casualty or theft losses, which have different rules. Without knowing the specific nature of your extraordinary loss, it's hard to give you the exact form. If you're using tax software, look for sections related to "Other Itemized Deductions" or "Miscellaneous Deductions" in the Schedule A section.
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GalacticGuardian
•Thanks for the response. The K-1 doesn't give any more details about what makes this loss "extraordinary" - it's from a partnership investment. Does this mean I definitely need to itemize to claim this? I was planning to take the standard deduction since it's higher for me.
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Dmitry Smirnov
•You're right to question this because it affects your strategy. If the loss is from a partnership investment, it might actually be a Section 165 loss which could potentially be claimed on Schedule A without being subject to the 2% floor. However, if the standard deduction is more beneficial for you overall, you might want to run the numbers both ways. Sometimes these losses can be carried forward to future tax years if you can't utilize them now. I'd recommend checking with the partnership that issued the K-1 for more specific guidance on the nature of this extraordinary loss, as this would determine exactly where and how to report it.
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Ava Rodriguez
I had a similar issue last year with a Code W loss on my K-1. After hours of confusion, I finally used taxr.ai (https://taxr.ai) to analyze my forms. It was a lifesaver! I uploaded my K-1 and within minutes it showed me exactly where to report my "extraordinary loss" - turned out mine was actually a Section 165(c)(2) loss that needed to be reported differently than I thought. The software I was using didn't have clear prompts for this situation, but taxr.ai explained it in plain English and gave me step-by-step instructions.
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Miguel Diaz
•Does taxr.ai work with all tax software? I'm using FreeTaxUSA and have a similar issue with my K-1, but I'm worried about compatibility issues.
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Zainab Ahmed
•I'm skeptical about any AI for taxes tbh. How does it know where to put stuff that even the regular tax programs don't? Does it actually file for you or just give advice?
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Ava Rodriguez
•It works alongside any tax software you're using - you don't need to switch programs. I was using TurboTax and could apply the guidance directly. It doesn't file for you, but analyzes your documents and gives specific directions. For your skepticism, I totally get it. What impressed me was that it specifically cited the IRS regulations relevant to my situation and explained why certain losses get special treatment. It's not filing for you - it's just interpreting your forms and giving you actionable guidance based on tax code. Think of it as having a tax pro look over your documents but without the high hourly rate.
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Miguel Diaz
Just wanted to update that I tried taxr.ai after seeing it mentioned here. It was surprisingly helpful with my K-1 issues! Uploaded my form and it immediately identified my Code W as a Section 165 loss from a business transaction and showed me exactly where to enter it in FreeTaxUSA. The site explained that extraordinary losses often require special handling and don't fall under the 2% AGI limitation like regular miscellaneous deductions. Saved me a ton of research time and probably a few hundred dollars in deductions I might have missed.
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Connor Gallagher
If you're still struggling with this after trying everything else, you might want to contact the IRS directly. I know it sounds painful (because it usually is), but I used Claimyr (https://claimyr.com) last month when I had a similar K-1 issue that was driving me crazy. Check out how it works: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but they got me connected to an actual IRS agent in about 20 minutes instead of the 2+ hours I spent on hold before. The agent walked me through exactly where to report my partnership loss and confirmed it was a special case that didn't follow the normal rules. Sometimes you just need to hear it directly from the source.
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AstroAlpha
•How does this service actually work? Seems too good to be true that they can somehow get you through to the IRS faster than waiting on hold yourself.
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Yara Khoury
•Yeah right. I'll believe the IRS picks up the phone when pigs fly. This sounds like a scam to me - nobody can magically get through the IRS phone system faster than anyone else. They probably just charge you and then put you on hold anyway.
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Connor Gallagher
•It's actually pretty straightforward. They use an automated system that waits on hold for you. When they reach an agent, you get a call connecting you directly. They don't do anything special to "cut the line" - they just handle the waiting part so you don't have to sit with your phone for hours. For those who are skeptical, I felt the same way initially. But the alternative was sitting on hold for hours during my workday, which wasn't feasible. They don't charge until they actually connect you with an agent, so there's no incentive for them to fake it. The IRS does eventually answer calls - the problem is the ridiculous wait times that most people can't manage.
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Yara Khoury
Well I'm eating my words now. After my skeptical comment, I decided to try Claimyr out of pure frustration after spending 3+ hours on hold with the IRS over two separate days. Got connected to an IRS rep in about 25 minutes. The agent was actually super helpful about my Schedule K-1 issue and confirmed that my extraordinary loss under code W should be reported on Form 8949 in my specific situation (it was related to worthless securities). This was completely different from what my tax software was suggesting. Sometimes you really do need to speak directly with the IRS to get the right answer, especially for these uncommon situations.
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Keisha Taylor
The best approach is to look at the K-1 instructions from the partnership itself. Usually there's a supplemental page that explains what makes up code W. In my experience, extraordinary losses are often from casualty events or worthless securities, and the tax treatment varies accordingly.
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GalacticGuardian
•You're right, there were additional pages with the K-1. Looking back at them, it says it's related to "business property partially destroyed in a natural disaster" but it doesn't give specific filing instructions. Would this change where I enter it?
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Keisha Taylor
•That changes everything! A loss from business property damaged in a natural disaster is definitely a casualty loss from a federally declared disaster area, which gets special treatment. This should be reported on Form 4684 (Casualties and Thefts), Section B since it's business property. The good news is that these losses aren't subject to the usual personal casualty loss limitations and can be deducted even if you take the standard deduction. After completing Form 4684, the business casualty loss will then flow to your Schedule A, but in a different section than regular itemized deductions, potentially allowing you to claim both the standard deduction and this special loss.
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Paolo Longo
Does the loss relate to rental property by any chance? If so, it might go on Schedule E instead. I've seen K-1 code W losses for rental property damage go there rather than Schedule A.
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Amina Bah
•This is correct. If it's from rental property, it would go on Schedule E. Schedule K-1 codes can be really confusing because the same code might be reported differently depending on the nature of the underlying asset or activity. My accountant spent hours sorting through similar issues with my K-1s last year.
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