How to Show Aggregation of Business Operations (Section 1.199A-4) in ProSeries

This article will guide you through the steps to link multiple business activities for aggregation under Section 1.199A-4 in ProSeries Tax, which is essential for proper Qualified Business Income (QBI) deduction calculations.

For more depreciation resources, check out our Tax topics page for Schedule C where you'll find answers to the most commonly asked questions.

Aggregation of business operations for QBI purposes is supported in the following modules:

• Individual
• Partnership
• S-Corporation
• Fiduciary

Steps to Aggregate Business Operations for QBI

To link multiple business activities for aggregation, you'll use the Qualified Business Income Deduction Smart Worksheet associated with each activity and connect them to a common QBI Component Worksheet.

Access the Relevant Schedule:

1. Open your client's tax return in ProSeries.
2. Press F6 on your keyboard to bring up the Open Forms window.
3. Type the hotkey for the relevant schedule (e.g., EW for Schedule E Worksheet, C for Schedule C, F for Schedule F, P for K-1 Partnership, S for K-1 S-Corp) and press Enter.
   • Note: While ProSeries allows you to name or describe individual Schedule E worksheets, the key to aggregation is linking them, not the name itself.

Link Activities to a QBI Component Worksheet (Example for Schedule E):

1. For the Schedule E Worksheet, scroll down to the Qualified Business Income Deduction Smart Worksheet.
2. In the field labeled QBI Worksheet to report (double-click to link) (typically box B on Fiduciary Schedule E), double-click to open the selection.
3. Choose an existing named QBI Component Worksheet to link the current Schedule E activity to, or create a new one. All activities you wish to aggregate must be linked to the same QBI Component Worksheet.
4. Repeat for All Aggregated Activities.
5. Repeat Step 2 for each additional business activity (e.g., other Schedule E properties, Schedule C, Schedule F, or K-1 income) that you intend to include in this same aggregated group. Ensure they are all linked to the same QBI Component Worksheet.
6. Go to the Forms menu and search for Form 8995A. Under that form, select the QBI Schedule B.

All of the assets linked to the QBI component will now show on the QBI Schedule B aggregation statement.

Review Aggregation Worksheets and Deduction:

1. ProSeries will automatically calculate the QBI deduction and generate either Form 8995 (Simplified Computation) or Form 8995-A (Qualified Business Income Deduction) based on the return's requirements.
2. For review, ProSeries provides a QBI Component Worksheet for individual activity entries and a QBI Deduction Summary Worksheet to show the net amounts from all aggregated activities.
3. You can locate these worksheets and the deduction summary within the Forms In Use section on the left side of the ProSeries application screen.
4. For business returns, an "199A Statement A Summary" and "Schedule K-1 Statement A - QBI Pass-through Entity Reporting" will summarize the activities for each partner, shareholder, or beneficiary.

Specific Considerations for Rental Real Estate (Safe Harbor)

• When aggregating Schedule E (Rental & Royalty Income) activities and claiming safe harbor per IRS Notice 2019-07, ensure you select the "Claiming safe harbor on rental real estate per IRS Notice 2019-07" checkbox on only one of the activities within that specific aggregated grouping.
• For all other Schedule E activities within the same aggregated group, enter 1 in the "Business is a qualified trade or business: 1=yes, 2=no [Override]" field.

General Requirements for Aggregation

For businesses to be properly aggregated for Section 199A purposes, they generally must meet the following criteria:

• A person or group of persons must directly or indirectly own 50% or more of each trade or business for a majority of the tax year.
• All trades or businesses within the aggregated group must use the same tax year end.
• None of the trades or businesses can be a specified service trade or business (SSTB).
• The aggregated trades or businesses must satisfy at least two of the following factors:
  • They provide products or services that are the same or are customarily offered together.
  • They share facilities or significant centralized business elements (e.g., personnel, accounting, legal, human resources, or information technology resources).
  • They are operated in coordination with, or in reliance upon, one or more of the businesses within the aggregated group.

Output and E-filing

• ProSeries automatically generates Form 8995 or 8995-A based on the return's specific requirements.
• Supporting statements or itemizations created for a line in the tax return are not automatically e-filed with the return. However, you can attach a PDF file to a 1040 e-file return if additional information needs to be transmitted electronically. This typically applies if you choose not to mail a Form 8453.