Tax change due to deleted prior year self-employment income and expenses

[smsdiego]

My question relates to the self-employment section of Turbo Tax. In the years 2020 and 2021 I had a company that was run as a sole proprietorship. In 2022 this company transitioned to an S-corp. Here’s the short of it:

2020 - 2021: The company filed as sole prop on our Schedule C. The 2020 tax year had a tax loss on the Schedule C of under $500. The 2021 tax year had a small gain.

2022: First year filing as s-corp after converting last Aug. On the corporate level, the 1120s and the K-1 included on our return. The K-1 shows a gain. 

Here’s the issue. After adding the K-1 in Turbo Tax to our return I removed the self-employment/schedule C section for 2022 since it was all on the K-1 now. When I did that it caused my taxes due (fed and state) to jump up by over $2k combined. Prior to deleting this section I had entered zero new 2022 self employment info. The only numbers showing inside of Turbo Tax on the main income screen were in the 2021 column. So I am very stumped as to what caused the jump. The only thing I can think of is it was carrying something over from 2020 or 2021, but I have no idea what that would be given the gain/loss from each of those years.

Any help in tracking down what caused this is greatly appreciated.

[RobertB4444]

If you had any assets that you were depreciating then removing the schedule C would have removed any depreciation deduction that you had.  Since those assets and that depreciation should be on your 1120-S now this shouldn't change your bottom line at all.

@smsdiego 

[smsdiego]

Thanks a bunch, @RobertB4444. Is there a way to see what items were being depreciated on my 2021 return or somewhere within TurboTax?

[RobertB4444]

Yes.  Log in to your TurboTax account and look at the prior year returns.  You'll be able to look at all of 2021 and see what you were depreciating.

@smsdiego 

[smsdiego]

Thanks, @RobertB4444. From looking at my 2021 return there is no amount included on Schedule C line 13 (depreciation line item). The return also doesn't have a form 4562, which I believe is where the breakdown would have been found, correct. Given this, is it likely that there is something other than depreciation carryover that caused the original issue? 

[RobertB4444]

There aren't many reasons that deleting your schedule C business should change your refund indicator like that unless there is a carryover loss or depreciation/asset issues.  What I will tell you is that the refund counter is notorious for changing and updating in weird ways and obviously can't be trusted completely until you have finished.  

I would continue with the return as is (you've already deleted the business, after all) and see if your refund at the end matches what you think it should be.  If it doesn't then it will be time to go through your return and figure out what is missing or added this year.

@smsdiego