QBI loss limitation

[CamarilloCPA]

I just spent 90 minutes on the phone with support, asking how Lacerte is doing a calculation to limit losses on form 8995.  They had no clue, said look at the 461 form instructions.  Which I have.  Their calculations seem way off, but the really concerning part is they have no idea how the program is doing the calculations.  Lacerte seems like a really low quality product at this point.  Does anyone know what a more premium product out there is?  Or how the 8995 loss disallowance calculations are done?  Because no one at Lacerte has any clue.

[PhoebeRoberts]

Are you asking about the Loss Netting on the 8995-A, Schedule C? Lacerte does a fine job of that, and its calculations agree with my Excel file.

Or are you asking about the current-year QBI losses disallowed / prior year disallowed QBI losses allowed in the current year? The statutory calculation of those is unintuitive, but there are worksheets that show you exactly how Lacerte does the math. They come after state refunds taxable in current year, state refunds taxable in subsequent year, and taxable Social Security worksheets, and before the Qualified Dividends and Capital Gains worksheet. My clients with them have 3 sets of calculations: Qualified Business Income, QBI Losses Disallowed, and Prior Year Disallowed QBI Losses Allowed in Current Year. I don't bother proofing them in Excel, because Lacerte appears to be doing it correctly and it involves having multiple categories of passive losses and QBI losses carried forward by year since 2018.

[CamarilloCPA]

HI Phoebe - thank you so much for your thoughtful reply!

I am asking about the QBI losses disallowed losses allowed in the current year.  I expected a worksheet but there is not one.  Just one that gives the number, no indication of the calculation, and the numbers seem suspect.  This is in the 2021 program. 

The disappointing thing is that Lacerte cannot tell me how the program is doing the calculation.  I know they usually say  (I'm a 25 year customer) "this is exactly what the IRS says to do and this is how we did it".  But in this case, they cannot even do that.

Thanks for your help.  

[PhoebeRoberts]

I agree that the 2021 version of Lacerte had substandard worksheets for QBI. My notes for 2021 returns say "this is a big ugly calculation; assume Lacerte did it right." Having the 2022 program with all the worksheets, I could probably cobble together an Excel file that does the math. I know that for the "easy" pieces (PTP QBI, in my case), the 2022 numbers seemed really wrong, so I worked through the forms instructions and Lacerte worksheets, and I was happy with the numbers Lacerte came up with. It's just a super unintuitive process for determining what QBI amounts free up.