Schedule K-1 for MLP Stocks

[Inspector]

Hi,

I had bought over last year few MLP stocks for their dividends, and have now received the dreaded schedule K-1s for the first time. I used to do my taxes on my own up until now, but this one looks fairly complicated. I was wondering if anyone from the group has any experience on this. I saw over the web that Turbo Tax may handle it (though wasn't clear which package I should be using), and would like to know if someone has gone through the same, or should I find a CPA...

Thanks,
Inspector

[samv]

Congratulations and sympathies!!! You will soon become a tax expert :). The best way to waste 3 hours of your time each year is to buy an MLP.

Turbo-tax premier is supposed to handle it. You will get tired from just entering all the numbers from K-1 into Turbotax. At the end of the exercise you'll wonder if anyone (including turbotax, IRS, MLP) knows anything and understand anything about the tax code! :)

BTW which MLP was this?

I do this every year. It's do-able. I seriously doubt if any cheap CPA/tax-preparer will do any better job that you will with Turbo tax premier. You probably won't be able to afford services of those who know this well.

Hi,

I had bought over last year few MLP stocks for their dividends, and have now received the dreaded schedule K-1s for the first time. I used to do my taxes on my own up until now, but this one looks fairly complicated. I was wondering if anyone from the group has any experience on this. I saw over the web that Turbo Tax may handle it (though wasn't clear which package I should be using), and would like to know if someone has gone through the same, or should I find a CPA...

Thanks,
Inspector

[Inspector]

Thanks for the candid response. I sure don't want to give away whatever miniscule additional dividend I may have got by these MLPs to tax accountants. Turbotax premier will do.

It does appear that my cost basis will keep changing and if I own it for a longer term, the taxes after the eventual sell would as well be a pain. Did you ever sell any MLP after 2-3 years of ownership? I guess after my first pass, I will have to re-evaluate the trade-offs for these.

It was BX and ETP that enticed me, to answer your other question.

[Inspector]

Sam/Others,

What's the experience regarding REITs for a tax-filing point of view? I know they just give a 1099, though not sure if that get's treated like any other 1099 from banks, or is there any special treatment again. I currently don't hold any out of my IRA, but would like to know while we are on the topic.

Thanks again,

Inspector

[FB2020]

Sam/Others,

What's the experience regarding REITs for a tax-filing point of view? I know they just give a 1099, though not sure if that get's treated like any other 1099 from banks, or is there any special treatment again. I currently don't hold any out of my IRA, but would like to know while we are on the topic.

Thanks again,

Inspector

I hold few REITs and from what I understood they are not that much different to deal with compared to other funds. I used turbotax and put details in for REIT and others at the same time, same form. Just follow the instructions.

[FB2020]

Congratulations and sympathies!!! You will soon become a tax expert :). The best way to waste 3 hours of your time each year is to buy an MLP.

Turbo-tax premier is supposed to handle it. You will get tired from just entering all the numbers from K-1 into Turbotax. At the end of the exercise you'll wonder if anyone (including turbotax, IRS, MLP) knows anything and understand anything about the tax code! :)

BTW which MLP was this?

I do this every year. It's do-able. I seriously doubt if any cheap CPA/tax-preparer will do any better job that you will with Turbo tax premier. You probably won't be able to afford services of those who know this well.

Samv,
Does turbotax premier specifically state that it handles forms K-1 etc. also?
From what I understand, the accounting itself is not that bad, you just need to transfer all the items onto your personal tax return from K1.

If turbotax does all this automatically, then should be relatively painless, no? Am I missing something?

[samv]

1st question - yes. It does support K-1s

2nd question -
It can become unbelievably complicated.
As of now, K-1s (at least in my case) can not be imported into turbotax.
Most MLPs deal with oil and gas, pipelines and things like that.

1. The tax code is full of gimmics for those industries (depletion, credits, depreciation and a zillion other things that I don't remember.) Each one is listed out in K-1 that need to be transferred manually to Turbotax.
2. Along the way sometimes you have to make elections (about whether you want credit or you want to amortize etc.) The things are just not explained well and even if they are it is not that easy to get the concept.
3. MLPs have operations in foreign countries. In that case a lot of line items in some boxes are doubled/tripled. More work with keyboard.
4. You might have to keep track of things from tax year to tax year.
5. Some things are treated differently for AMT. Some states treat some things differently (Hello CA I am talking about you. Why do you need to be so uncool :) ? )
6. Sometimes Turbo tax gives up and asks you some cryptic question that you can't understand and no explanation is given :)

Samv,
Does turbotax premier specifically state that it handles forms K-1 etc. also?
From what I understand, the accounting itself is not that bad, you just need to transfer all the items onto your personal tax return from K1.

If turbotax does all this automatically, then should be relatively painless, no? Am I missing something?

[samv]

I hold few REITs and from what I understood they are not that much different to deal with compared to other funds. I used turbotax and put details in for REIT and others at the same time, same form. Just follow the instructions.

True. REITs are easy. The only thing is to remember that any dividend you receive is not qualified (15%). But your broker 1099 usually lists that out so you are cool. MLPs play at a different level.

[samv]

T
It does appear that my cost basis will keep changing and if I own it for a longer term, the taxes after the eventual sell would as well be a pain. Did you ever sell any MLP after 2-3 years of ownership? I guess after my first pass, I will have to re-evaluate the trade-offs for these.

It was BX and ETP that enticed me, to answer your other question.

Yes, I have sold MLPs before. I own ETP too!

[samv]

Here is the graphic I received with one of my K-1's this year (from KMP). Notice how many forms these entries can feed into! (This is kind of worst case - an average investor may not fill each and every one of those.). I hope that the attachment works!

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