K-1 qualified dividends on a 1041 Complex Trust Return

[lshuling]

I have a new trust that I am inputting into my 2023 tax software so that I can update to 24 with all pertinent information. My software does not seem to be handling the qualified dividends correctly on the sole K-1. The Trust income is Interest and Dividends. The beneficiary K-1 should report these items minus allocated deductions. The client's former CPA reported Interest, Dividends, and Qualified Dividends this way (each of these minus deductions). My software only allocates the deductions to the Interest and Dividends in line 1 and 2a of the K-1. The prior accountant also had qualified dividends minus allocated deductions as the IRS instructions direct. My software makes the qualified dividends equal to the ordinary dividends. This does not seem correct. I have contacted programming and received no help. Is there something I am missing? I can not force it on the K-1 worksheet because that will cause the front of the 1041 line 2 b to be incorrect. Any help is appreciated. Thank you, Lisa

[Lion]

What software do you use? What does tech support tell you?

[lshuling]

I use Drake. They told me that they abide by IRS rules and this is the way it should be reported and that it is actually beneficial to the client for all of the Dividends to be classified on the K-1 as qualified. Duh. It may be beneficial, but is it correct?

[FEDUKE404]

It would seem that the simple answer would be to enter the amounts as shown on lines 2a and 2b of the Form 1041 K-1, and your software should handle the rest.
There are other lines on the K-1 related to "deductions" that may be allowable. EVERY line entry on a K-1 is important. . .did you enter each one? (The Q&A option can help also.)

Surely Drake can manage all of that.

Or am I missing something ? ?

[lshuling]

FEDUKE404, Unfortunately, if I manually override the flow from the the 1099-DIV to the K-1 and do input these numbers directly on the K-1, it changes how the dividends are reported on the face of the 1041. The software will report the portion of qualified dividends that I enter on the K-1 in the override as dividends of the beneficiary and the remaining as dividends of the Trust on the front of the 1041. All of these dividends should be reported as Beneficiary dividens on line 2b(1). It should not be split, reporting some of them as Trust dividends. So, no, Drake is not handling it.

[FEDUKE404]

FEDUKE404, Unfortunately, if I manually override the flow from the the 1099-DIV to the K-1 and do input these numbers directly on the K-1, it changes how the dividends are reported on the face of the 1041. The software will report the portion of qualified dividends that I enter on the K-1 in the override as dividends of the beneficiary and the remaining as dividends of the Trust on the front of the 1041. All of these dividends should be reported as Beneficiary dividens on line 2b(1). It should not be split, reporting some of them as Trust dividends. So, no, Drake is not handling it.

I always had heard Drake was the king of kings in software. Sometimes I wonder. . .

If you have a more or less plain vanilla K-1, you should be able to enter, even better with software Q&A option, each and every line / letter item shown on the K-1. (Try going through an oil/gas PTP K-1 for a challenge!).
Any time you start using overrides, you are asking for trouble AND with such in the data file any efiled return is likely to be rejected at submission time. IIRC, I have not used any overrides this tax season.

(You can always get a cheap version of Turbotax and run the K-1 through their software. I guarantee you will get reliable results for the destination of the K-1 numbers!)

Perhaps I am confused: Are you CREATING or USING a Form 1041 K-1 ??

[lshuling]

I am creating the 1041, the resulting sole K-1 is incorrectly alocating all dividends as qualified. I was tring to override the numbers on this K-1, but like I said it changes pg 1 of the 1041 and I do not want to do this.