Incorrect prior depreciation from prior year in misc. investment expenses

[ytl]

I have several items of investment assets to be depreciated over time and they are in TurboTax since day 1 (several years ago).  This year when TurboTax transferred the previous year tax form, it did not get the prior depreciation amounts correctly.  E.g. some of the prior depreciation is larger than the total initial cost, which triggered an error in the final review.  I went back to the investment expenses section and corrected all the "prior depreciation" amounts using the numbers from 2019's form 3885A (prior depreciation + current depreciation columns).  However after all is done, the 2020 form 3885A is still showing prior depreciation amounts different from my input.  Some of these amounts are larger than the initial cost of the item and I assume they are incorrect.

I also tried inputting 2019's prior depreciation column only as the "prior depreciation" amount in the investment expenses section.  The 2020 from 3885A still shows seemingly random prior depreciation numbers different from my input.

How to correctly input the prior depreciation amounts?

Thanks.

[Carl]

First, be aware that I know nothing about CA state taxes (which is what I assume you're dealing with here, since the 3885A is a California form.)

You may need to check things on the federal tax return first. In most cases the state return imports it's data from the federal return. I do not know if the CA state return imports the depreciation information from the federal return, or not.

It may also help someone who is more familiar with the CA state return to help you, if they know if your investment is passive (SCH E asset) or non-passive (SCH C asset).

[ytl]

Thank you Carl for your reply.

I am actually trying to change the prior depreciation amounts in the federal tax section of TurboTax.  But I am getting the numbers from form 3885A which is indeed a California form as you pointed out.  I cannot find any form or report in the Federal tax return printout (even in the detailed "for your records" version) that has itemized investment asset depreciation.  My assets are for schedule E.

[Carl]

You need to pull up the IRS Form 4562 from your 2019 return. There are two of those forms for your rental property. Both of them print in landscape format. One is titled "Depreciation and Amortization Report" and is most likely the one you need. The other is titled "Alternative Minimum Tax Depreciation" and if that one is needed, you will be specifically asked for "AMT Depreciation".

If you used the online version to prepare your 2019 tax return, then you need to download the PDF file from your online account. The forms will be in that PDF file.

If you used the CD/Desktop version to prepare your 2019 tax return, then you need to open the 2019 tax return in the TurboTax 2019 program on your computer.

- Under the FILE tab select the "Print/Save for your records" sub-tab.

- Click the "Save a PDF" button.

- Select the "Forms and supporting statement" radio selection box.

- Click the "Save as PDF" button.

This will save a PDF file to your computer with absolutely everything; all calculation forms and worksheets including the 4562's mentioned above. . So you can expect it to be over 100 pages. Search that PDF file for the two 4562's mentioned above.

On the 2019 from 4562 add together the amounts in the prior depr column and current year depr column. That total is the amount you should have for that same asset on your 2020 tax return, in the prior years depreciation.

[ytl]

Thank you Carl.

I did exactly what you suggested and found that the prior depreciation in form 4562 of 2020 does not match the sum of the prior and current depreciation in 4562 of 2019.  I tried to change the prior depreciation in 2020 (in the misc investment expenses in Federal tax section) to the sum from 2019, but it seems that no matter what I enter, TurboTax puts in its own random number overriding my input.   So not only Turbo Tax did not import the numbers incorrectly from 2019, it does not allow me to manually correct them.

(This seems to be a problem for 2020 only.  I printed out form 4562 of 2018 and it is consistent with the numbers in 4562 of 2019, precisely as you suggested.)

[Carl]

(in the misc investment expenses in Federal tax section)

Depreciation is not in the expenses section of the program. Depreciation is reported on line 18 of the SCH E while other expenses get reported on other lines of the SCH E. None of the lines on the SCH E have anything to do with prior year's depreciation.

So for 2020, either your in service date is changed and wrong (most likely) or you had varying business use percentage over the years. If asked for things like "days personal use" and/or "days rented" I expect the property to have been rented the entire year, every year with no personal use days.

One thing you can do since you have the 4562 from 2019, is to delete the asset from 2020 and re-enter it using the data from the 2019 form 4562. Remember, for 2020 the prior year's depreciation is figured by adding together amounts in "prior years depr" and "current year depr" column.

[ytl]

Thank you for your continued help Carl.

My 4562 form is fine now, but my 3885A is still wrong.  3885A is basically the same as 4562, but is a California form for a depreciation report for misc. investment assets not tied to a specific real property.  I deleted all the assets in TurboTax and reentered them manually using the prior year's 3885A.  During the question session, everything went well - the suggested prior depreciation amount is exactly the correct sum from last year.  However when I printed out the tax records, the list of assets on 3885A with the initial costs is correct but depreciation basis and prior depreciation seem to be all random numbers.  Prior depreciation on the form is not the same as that shown in the question session, and some of the depreciation basis is higher than the initial cost.

What else can I try?  I am pretty sure my 3885A as-is is incorrect.

[Carl]

Just a reminder I"m flying blind when it comes to state taxes for "any" state.

The state tax return imports needed data from the federal return. When you change something on the federal return, it may not get re-imported to the state return unless you completely delete the state return and start over. That may mean (for all I know) that after deleting the state return (however you do that, I don't know) you have to uninstall the state module and then re-install it anew for it to import the data again, so it will have the changed information it needs. Just a guess. But it's all I got.

[ytl]

Carl, you are a life saver!  Your solution worked.

There is actually a "remove California data" function under the file menu.  I made a backup of the .tax file just in case, use this function to remove the CA state tax forms and redo the CA tax from scratch.  It got the correct numbers from the Federal data now.

Thank you very much again!

[Jasminsreichle12]

Hi I have a similar issue where the State return 3885A pulls the wrong number from the amortization and depreciation schedule. The numbers are correct, but instead from pulling the prior depreciation of $1028 (from the 2019 Return) it pulls the current depreciation (which includes current year number).

any ideas how I can fix THAT? 

[ytl]

You can try what I did, as follows.

The state 3885A inherits data from the federal tax forms, so I had to change the numbers in the federal tax section.  The prior depreciation in 2020 should show the sum of the prior depreciation in 2019 and the current depreciation in 2019.  After importing the 2019 tax form, each of my assets originally showed some complete crap in its prior depreciation in 2020.  I deleted the asset, reentered the asset manually using data from the 2019 asset depreciation worksheet (in the "Print for records" output).  If all the data entered for the asset are the same as the original, the prior depreciation in 2020 should automatically be the correct sum.  I then removed the state data (under File menu) and redid the state tax.  That did it for me.

It sounds like you have a similar problem.  (I'm pretty convinced that there is a bug in the Turbotax code in importing 2019 data.)  So the above should be worth trying.

[Jasminsreichle12]

Hello - I never saw your answer last year and am totally ashamed you took your time and answered - I want to say thanks for that - yes must have been a bug and i ended up deleting items, then re-adding and it worked. \

I have a new question - for 2020, form 540 - Tax line 31 has the box Tax Table checked. Now, for 2021, my paperwork has the box "tax rate schedule" checked. Why is this different now? I did not change anything. How can I change this, so there is a consistency?

[RobertB4444]

@jasminsreichle12  Your tax is pulled from whichever calculation benefits you best.  Don't change anything.  You don't need consistency on this one.