If you receive a Schedule Q (Form 1066), Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation, it means you own a residual interest in a Real Estate Mortgage Investment Conduit (REMIC).
The REMIC uses Schedule Q to report your share of its taxable income, losses, excess inclusion income, and certain deductible expenses each quarter. Although a REMIC generally doesn't pay federal income tax itself, the owners of residual interests are responsible for reporting their share of the REMIC's tax items on their individual tax returns. In short, Schedule Q provides the information you need to correctly report income and expenses related to your REMIC investment.
What Is a REMIC?
A Real Estate Mortgage Investment Conduit (REMIC) is a special investment vehicle that holds pools of mortgages and issues interests to investors. REMICs are commonly used in mortgage-backed securities.
If you own a residual interest in a REMIC, you may receive a Schedule Q each quarter showing the tax items that must be reported on your return.
What Information Is Reported on Schedule Q?
Schedule Q reports several tax items that may affect your federal tax return.
Quarterly Taxable Income or Loss
The form reports your share of the REMIC's taxable income or net loss for the quarter. You generally use this information when preparing your income tax return.
Excess Inclusion Income
Schedule Q reports any excess inclusion income allocated to your residual interest.
This amount has special tax rules and generally cannot be offset by certain deductions, losses, or net operating losses. Because these rules can be complex, it's important to enter the information exactly as shown on your Schedule Q.
Section 212 Expenses
The form also reports your share of the REMIC's Section 212 expenses.
These are investment-related expenses associated with producing or collecting income from the REMIC. The tax treatment of these expenses depends on current federal tax rules and your individual tax situation.
Who Needs to Enter Schedule Q?
You should enter Schedule Q information if you received the form from a REMIC and are required to report the income, loss, or expense amounts shown on the schedule.
Reporting Schedule Q information correctly helps you:
- Comply with IRS reporting requirements.
- Report the correct amount of taxable income or loss.
- Avoid filing errors that could result in IRS notices or adjustments.
- Ensure any allowable tax benefits are properly reflected on your return.
Where Do I Enter Schedule Q in the Program?
To enter information from Schedule Q (Form 1066), follow these steps:
- Select Federal.
- Select Income.
- Select Select My Forms.
- Select Less Common Income.
- Select Schedule Q (Form 1066).
Enter the information exactly as it appears on your Schedule Q.
Important
Schedule Q is typically issued only to taxpayers who own a residual interest in a REMIC. Most taxpayers will never receive this form. If you received Schedule Q and are unsure how the income, excess inclusion amounts, or expenses affect your return, review the information provided by the issuer carefully and keep a copy of the form with your tax records.