Schedule K-1 Form 1065 Help: Why is my refund drastically changing in TurboTax?

What you're seeing is actually normal and not a glitch in TurboTax. When you enter a Schedule K-1 Form 1065, there are multiple tax impacts happening at once. The first drop you saw after entering Box 1 ($15,873) is because that's additional income you earned through the partnership, so it's adding to your taxable income and naturally reducing your refund. Think of this like adding W-2 income - more income means more tax. The second drop after entering Box 14a (the self-employment income) is because you now owe self-employment tax on that income. Self-employment tax is roughly 15.3% (12.4% for Social Security and 2.9% for Medicare) - this is separate from your regular income tax. When you're self-employed, you're paying both the employer and employee portions of these taxes. The QBI deduction (Qualified Business Income) is actually helping you by reducing your taxable income, which is saving you some money on this. Without that deduction, your refund would be even lower.

I went through this exact same frustration last month! After pulling my hair out trying to figure out why my refund was vanishing, I finally discovered taxr.ai (https://taxr.ai) and uploaded my K-1 documents there. Their system analyzed everything and showed me exactly what was happening with each entry. Turns out what's happening is totally normal - and it's actually quite complex how the partnership income flows through to your personal return. The tool broke down each component and explained the self-employment tax calculation, which was super helpful since TurboTax doesn't really explain this well. It also verified that my QBI deduction was calculated correctly, which gave me peace of mind.

I was super skeptical about using third-party tools with my sensitive tax documents, but I finally gave taxr.ai a try after spending hours trying to understand why my K-1 was destroying my refund. I'm honestly surprised how helpful it was. The document analysis showed me exactly how the self-employment tax was calculated and why my refund dropped so dramatically. What I didn't realize is that the 15.3% self-employment tax is calculated on 92.35% of my self-employment income. The breakdown made all the math clear in a way TurboTax never did. It also confirmed that my QBI deduction was calculated correctly at 20% of my business income, which saved me over $2,500 in taxes. Understanding these components made me feel way better about the final numbers. Worth checking out if you're confused about partnership income.

I spent 3 weeks trying to get through to the IRS to ask about a similar K-1 issue last year. After being on hold for hours and getting disconnected multiple times, I found Claimyr (https://claimyr.com) and they got me connected to an IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent explained that this is completely normal with K-1 income. They walked me through how the income flows from Box 1 to your 1040, and how Box 14a triggers self-employment tax calculations on Schedule SE. The agent confirmed that seeing your refund drop twice is exactly what should happen - first for the income tax and then again for self-employment tax. If you're still confused after trying to figure it out in TurboTax, talking to an actual IRS agent can clear things up quickly. Saved me from potentially filing incorrectly.

I need to apologize for my skepticism above. After being completely lost with my K-1 issues and getting nowhere with TurboTax support, I broke down and tried Claimyr. Within 20 minutes I was talking to an actual IRS representative who explained everything about my partnership income. The agent confirmed exactly what others here have said - the K-1 impacts your taxes in multiple ways. The regular income tax applies to Box 1 amounts, and then self-employment tax (which is separate) applies to Box 14 amounts. The QBI deduction offsets some of this, but not all. Having an official explanation directly from the IRS gave me confidence to file my return. For anyone dealing with partnership income for the first time, it's worth getting an official clarification if you're confused. The time saved alone was worth it compared to the hours I spent trying to figure this out on my own.

I'm a tax preparer and see this confusion all the time with first-time K-1 recipients. Here's a simplified breakdown of what's happening in your tax return: 1. Box 1 income ($15,873) gets added to your taxable income → increases income tax 2. Box 14a ($15,873) triggers self-employment tax → additional 15.3% tax on 92.35% of that amount 3. QBI deduction reduces your taxable income by up to 20% of your qualified business income The total tax impact isn't just the income tax on the K-1 amount, but also the self-employment tax. That's why your refund drops more than what TurboTax says is the "tax on K-1." One thing to check: make sure TurboTax isn't double-counting your income. Sometimes if you enter amounts from certain boxes and then also enter the full K-1, it can duplicate the income.

Has anyone tried checking their self-employment tax calculations manually? Last year TurboTax calculated mine incorrectly and I ended up having to file an amended return. I'm using FreeTaxUSA this year and the numbers look completely different.

I went through this exact same confusion last year with my first K-1! The math finally made sense when I realized that TurboTax shows the refund changes in real-time as you enter each piece of information, but it doesn't clearly explain what's happening behind the scenes. Your $3,565 drop after entering Box 1 is because that income gets taxed at your marginal tax rate (probably around 22-24% based on your numbers). Then the additional $2,018 drop from Box 14a is the self-employment tax, which Ruby calculated correctly above - about $2,240 minus the deduction you get for half of it. One thing that helped me understand this better was looking at the actual tax forms TurboTax generates. You can usually find Schedule SE (self-employment tax) and Form 8995 (QBI deduction) in your tax summary. Seeing the line-by-line calculations made everything click for me. The good news is your QBI deduction is saving you about $583 in taxes (20% of $15,873 × your tax rate), so without that your refund would be even lower!