I've followed the IRS instructions for filling out this form. In the case of my S-Corp we have a negative loss with the business. Based on my understanding of the instruction, Part 1 should only be showing a gain in Part 1 which in my case would be 0 which is supposedly allowed. In Part III I would enter my loss as a positve number since it's under the Deduction section. I've done this and run the error check. The error states that I cannot have a gain in Part 1 and a loss in Part III even though my basis is higher than the loss. What am I not understanding with this form.
I am having the same problem with this form. I also keep getting an error message about Line 1. It says" Total stock basis at the beginning of the year." However, the error message I get says "Number of days you required services should not be less than zero."!!!!! Seriously??!!
I can provide some conceptual input on this, but not sure if this form needs to be manually completed or if TT pulls the information from the K-1. My thought is it is manually completed.
The form requires manual input. Actually I did enter 0 on line 1 even though the K-1 is a negative number and put in the debts under Part III as a positive number, but I still get the error message that they don't agree even though they are both 0. Perhaps I should show the income for the year under Part II but that appeared to only be for loans.
Follow up responses:
@Rick19744 is correct when he stated that the form needs to be manually completed.
The program will, however, prompt users if the form is required to be completed and the form can be completed in Step-by-Step, without resorting to Forms Mode.
Distributions, income, nondeductible expenses and any other number which would be used to populate the stock basis, comes from the K-1. They would only need the beginning basis to figure out how much of the loss is deductible.
Once properly completed, will Turbotax support EFILING of returns with Form 7203? Or do such returns need to be printed and mailed in?
Form 7203 is showing that it is supported for e-file for TurboTax. It is also showing that it is currently available. You should be able to electronically file your return now.
Thanks for your detailed and very helpful responses.
I was hoping you, or anyone else, could help.
Several suggestions for things to review, as I've had no problem with the form and its usage of stock and debt basis info, so I have no reason to think the form is faulty:
(1) The statement "These are active losses so they should be allowed" is not correct - regardless of how much the active loss is, you are limited to the total of stock and debt basis...period!
(2) There are no negative numbers anywhere on the form, so if things are coming up negative the underlying information has been entered incorrectly - I think that is the underlying problem.
(3) The total in line 47d should be reflective of your total debt basis from line 29, OR whatever part of your line 29 debt basis is needed to cover remaining losses in excess of your stock basis.
From your discussion, it seems clear that you understand that first "stock basis" is used to cover the loss; once your stock basis is exhausted (reduced to 0), next debt basis is applied, assuming there is still more loss to be offset. Once debt basis is exhausted (reduced to zero), no further losses can be deducted and they are carried forward to next year.
(4) If, for example, stock basis is insufficient to cover your loss, then start allocating debt basis to cover it, but in no case can 47d (which should be a POSITIVE number in that form) be greater than 29 - maybe it's less than line 29 because you didn't need to cover remaining losses in excess your debt basis.
(5) Whatever part of debt basis is used to cover losses (line 47d) is then subtracted in line 30 from your starting basis in line 29, resulting in whatever carryover debt basis you might have - again, it seems you've fully understood this, and no, that line 31 number can never be less than 0.
Thanks @mlohrer , this was very helpful!
Now my issue is the next step, getting the K-1S to reflect the allowable loss from column (d) (line 36 for this part of my business) as well as carryover from column (e) on 7203 since losses exceeded the loan basis.
Here are the options I've tried on the Summary of Form 7203 screen where it says, "Please review and manually adjust your K-1 to reflect the allowed losses:"
It seems like the carryover isn't flowing from form 7203 36(e) into the K-1S, but it could be operator error again.
One approach would be to input the loss required in the K-1S to match the allowable loss on the K-1S with the 7203 value (like the 3rd bullet above) and then override the K-1S form by inputting the carryover from 7203 36(d). This seems to make the most sense to me, but I'm clearly not a tax or TT expert, which is why I appreciate this forum.
Does that make sense? Any other suggestions?
Glad you are making progress, but I don't have a lot of specific advice I can give you on the details you are wrestling with. A few cursory comments:
(1) You are correct that any loss not allowed would be carried over - each year, you just pull prior losses into the total, and deduct what you can via new stock or debt basis, and then again carry forward any excess - you never "lose" any prior loss, it just keeps rolling forward...
(2) Prior to this year's introduction of the 7203, I have never relied on Turbotax or the K-1 to carry loss information forward, I have always just handled that externally to the program, and made entries in following years accordingly.
Specifically, I have always just entered into the Turbotax K-1 the ALLOWABLE LOSS, not the loss as actually reported on the K-1 issued by a company. At this point, the 7203 has calculated the carry forward loss (because in Form 7203 lines 35 - 46 and totaled in 47 ARE THE REAL K-1 LOSS ITEMS AS REPORTED BY THE COMPANY), we'll see "next year" if this carry forward flows appropriately!
Hope you find a solution...
Thanks again for your help. Knowing that you also manually adjust K-1S carryforwards makes me feel more confident about also doing it.
I tried overriding the $0 carryover in this year's K-1S to the actual from the 7203 and it recalculated the allowable loss, so that wasn't a solution.
Clearly there's an issue with how the new 7203 info flows through the TT K-1S. Hopefully it will be fixed next year. My only concern is if some IRS program will flag next year's return due to a discrepancy in the $0 carryforwards shown in this year's K-1S vs. the actuals that I'll put in next year's form.
K-1 information, as you create it in Turbotax, is not transmitted as part of a personal return, K-1 information is only sent to the IRS as part of a company's return, and that will include the individual K-1's as received by you from the company, and with just the original information, so there is no "discrepancy" in carry forward losses at that level that the IRS will find.
To this point, prior to the introduction of the 7203, there was no formal way for the IRS to track "allowable loss" information, and it was up to individual tax payers to maintain appropriate records, should documentation be required. Moving forward, your carry forward loss will be "trackable" via the 7203, but that should make it easier for taxpayers to be sure they have proper records.
My problem is with line 3a of section 1. I have a value of -3,267 on my K-1 (1020-S). Instruction says only enter positive numbers in section l, so I enter 0 and it still highlights that line as being in error. What am I missing. I am entering the negative value, 3,267 in section lll.
I presume -3267 is your ordinary business loss for the year.
Section I of 7203 deals only with ADDITIONS to basis, which would be business income (NOT loss), so enter NOTHING in section I, remove even the entry "0" by deleting it from the 7203 (easy in forms mode, not sure how in interview mode, I don't use that mode), not sure if that is causing an issue as "0" is not a valid "business income" addition to basis.
Section III deals only with LOSSES you are trying to determine the allowability of. Line 35 Column A is a LOSS entry, so enter POSITIVE 3267, as the form PRESUMES that entry to be a LOSS - seems like you understand that.
The above process is how I have completed 7203's with no errors flagged...
I tried Turbo tax e-filing with f7203. It charged me e-filing fee, but it doesn't work, as of April 6, 2022. How can I get the fee back?
Desktop version. I also tried e-filing Federal first, but still same problem. It holds checking f7203 conflicting issue. -> click continue -> data transmits -> but not working.
It should be available for e-filing. You may need to update the software.
To check for updates you can follow these steps:
This posted within the last day:
<snip>....
Note: TurboTax currently doesn't support e-filing Form 7203, so if you are required to fill out this form, you’ll need to print and mail your tax return."
WHAT!?!? Is this true? If TTax requires me to fill out a form 7203, this will STOP TTax's ability to efile? TurboTax Premier has free Federal efile EXCEPT WHEN MINE HAS FORM 7203? Please tell me TT fixed this flaw!
mlohrer wrote:
"Note: TurboTax currently doesn't support e-filing Form 7203, so if you are required to fill out this form, you’ll need to print and mail your tax return."