Schedule E: S-Corp Prior Year Unallowed Losses

Forum|Forum|3 years ago
March 19, 2023
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I have a K-1 showing a profit for 2022. I had a carryover loss from 2021. TurboTax allows me to complete Form 7203 to calculate my allowable carryover loss to apply to 2022. However, when I get finished with Form 7203, the summary shows my Allowed Loss and the "K-1 Amount to Adjust" as the original K-1 value for 2022. It instructs me to manually adjust the K-1 value. If I subtract the carryover loss from the original K-1 value and enter that, I end up with the correct amount on Schedule 1 lines 5 and 10 as well as 1040 line 8. However, Schedule E is not correct per the IRS instructions. Schedule E line 27 correctly has the prior year loss box checked, but there is only a single line listed the non-passive income which is the K-1 amount - the carrover amount. Per the IRS instructions, there should be one line with the actual K-1 amount for the current year and a second line with the carryover amount with PYA in column a. The resulting total is the same, but it says "Caution: The IRS compares amounts reported on your tax return with amounts shown on Schedule(s) K-1". That concerns me. This seems like a bug. I think I could manually adjust that form in the download version, but I'm using the online version. Is there a fix for this in the online version or is there a way to "upgrade" to the downlaod version?

TurboTax Premier Online

Best answer by RobertB4444

You can switch from the online version to the desktop version. Here are the instructions on how to do that.

@RichA2023

RobertB4444Answer

Level 15

You can switch from the online version to the desktop version. Here are the instructions on how to do that.

@RichA2023

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RichA2023Author

Level 2

Thanks for the info. It appears that's just a way to transfer data from one to the other but requires purchasing the download version after already having purchased the online version. I guess I maybe messed up by paying for the online version before I knew I had everything completed correctly.

Fortunately, I figured out a workaround to my problem. I was able to enter a second K-1 named PYA (with the same EIN) which had the carryforward loss as its amount. That gave me the same net result but with the two separate lines on Schedule E as required. I'm a bit disappointed with TurboTax. That should have already been a provision in the software or there should have been clear instructions to that work around. I have to think that's a fairly common occurrence to have a carryforward S-Corp loss.

Anyway, thanks for the help!

yooperg

Level 2

I have the desktop version and the exact same situation. The desktop shows the same behavior as RichA2023 described, eg after using 7203 to determine allowable losses, TT wants me to adjust the K-1, and then only has one line on schedule E instead of two - one showing current year and one showing a PYA line for the loss carryover. This is new this year (with form 7203). TT 2021 and prior did this correctly with a PYA line on Schedule E for prior years loss carryover. Please fix this!!

PatriciaV

Level 15

Are you able to scroll down in the Line 28 section of Schedule E, p2, to see more lines after the first four that first display? In most cases, each S-Corp with Prior Year Adjustments will display a second PYA line after the one with the S-Corp name. But sometimes you need to scroll down to see it. Look for a gray scroll bar within the form itself, on the far right margin of the Line 28 boxes.

@yooperg

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RichA2023Author

Level 2

I can't speak for yooper920, but that's not possible in the online version since you aren't able to directly access forms. What you suggest is what I was hoping for if I was able to switch versions, but that didn't seem to be possible without paying for the software a second time. Fortunately, I was able to find a workaround and end up with the equivalent on my Schedule E.