I sold rental property at a nice profit. Turbo Tax has automatically calculated an underpayment penalty.

[1597980]

Thank you!

My question regarding carryover capital loss is in regards to Form 2210. There is a smart worksheet about capital gains for each of the 4 periods in 2022.  I didn't enter the carryover and it does not seem to affect the year end number though.  I think the year end number did account for the carryover.  On another note, on this same capital gain worksheet for Form 2210, there was an entry for "uncaptured Section 1250 gain", which was automatically calculated for me in Schedule D line 19.  When I looked at the numbers, I see that it's the depreciations allowed over the years minus carryover loss.  Now what I don't understand is that this depreciation amount was already RECAPTURED on Form 4797 when capital gains on the rental property sale was calculated and shown on Sch D Line 15.  Why do I have this as an "UN-recaptured" gain again?  Am I being double taxed for the depreciation recapture?  However, looking at tax summary, I don't seem to see this item. 

The property I sold is a two family that I rented out one unit and occupied the other as main residence.  The sale of my residence did not have taxable gain due to the $250K exemption.  Do I completely leave this out of the return?  I saw people saying that but wonder if I may need to enter that information for my state return (NJ)?

I really like your recommendation to file with the penalty and separately ask for penalty abatement/refund.  If I do that, do I have to file Form 843 by paper separately (since I'll be filing the return electronically and have tax due debited from my account)?  

Thank you!

[RobertB4444]

You're not being double taxed on the section 1250 gain.  It is being taxed at a different rate than the capital gains you received.  Because the deduction you got was a regular income deduction it is being taxed as regular income.

You should definitely put the sale of your primary residence on the return.  It used to not be a big deal but the last few years the IRS has really started asking about those sales.

You can file a separate form 843 by mail.  You need to come up with a pretty good reason for paying the taxes late but it never hurts to ask.  Here's a link to the fillable pdf of 843 on the IRS web site.

@1597980 

[1597980]

Thanks for your insight regarding putting the sale of primary residence even if I'm not required to.  

I looked at instructions for Form 843,  I can qualify for first time abate, which I believe would not require reasons for paying late.  With regards to where to file Form 843, I understand it should be where I file the income tax return.  I was a NJ resident for most of the year and moved to FL.  Since I'm e-filing my returns, I don't have to worry about which IRS location I'm filing with.  But where should I file Form 843? The IRS location for NJ resident or for FL resident? 

[MarilynG1]

If you are currently a Florida Resident (and used a Florida address on your Tax Return), you would mail Form 843 to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0002

Here's more info on IRS Addresses.

@1597980 

[1597980]

Thanks very much. 

On another note, how do I bypass the TurboTax screen that kept asking me to prepare a part year resident FL return as one is not required?  I can't finish the state returns because when I clicked "done with state returns", TurboTax kept returning to this screen.  If I clicked "continue" with state returns, it takes me to purchase link.  But I don't need to purchase a FL return.  Please someone help me.  I have been asking this question multiple times. 

[MonikaK1]

If TurboTax has started a Florida return even if you don't need to file it, please see below for how to remove or bypass that state return,  depending on which version of software you are using.

If you are using the TurboTax CD/Download software, you can go to the File tab, and on the Select the Returns You're Ready to E-file screen, choose Do not e-file my state return now and then proceed to e-file your federal. 
 

If you are using the TurboTax Online version, see this help article for steps to delete the state return; if you haven't paid or registered it yet. Otherwise, select Skip State to skip preparing a Florida return when it brings you to the state section.