Incorrect "Business %" on Asset Depreciation - Any way to recoup missed deductions?

[Carl]

Can I enter the data directly onto the "Forms" view in TTX?

Certainly won't hurt to try it that way. But first, on a wild whim I did a search for "TurboTax 2017 updates download" and found the latest update for TurboTax 2017 on the TTX website at https://ttlc.intuit.com/community/updating/help/manually-update-turbotax-for-windows-software-basic-...

So I would suggest you download and install that update and see if that fixes things first.If it doesn't fix things, then you most likely entered something wrong. We can work together and figure out what it is then.

[Topsy10]

I have re-entered all the 2017, 2018, 2019 original data into TTX.  I  updated each year of TTX upon being promptly.  Most of the figures calculated the same as my paper copies except for some rental depreciation sections which were off by $5-$50.  In Forms view I did an override on those figures so the totals are correct.  To start the 2017amendment process I'm having difficulty identifying/finding the section to amend.  Rental property/Schedule E is not one of the options to amend.  1099 MISC takes me to the Rental Property Step-by-Step, but I don't have any 1099 MISC forms to enter for rental property.  Am I on the right track to amend those returns?

[Carl]

Lets make sure you're doing this right. I doubt it, since your error goes all the way back to 2010. Most likely, you just flat out may not have the correct amount of prior year's depreciation already taken. But if you want to risk making a big mess even bigger, that's your decision. In the end, it may come back to bite you in a way that will make the cost of professional help seem like an absolute pittance in comparison.

First, you enter the 2017 tax data into TurboTax 2017 exactly as originally filed. Then you select the "print and file" option and actually print the return as originally filed. This tells the program that you have "in fact" filed the return. Compare the printout to the return you actually filed. It should match exactly. Save the .tax2017 file at this point and completely exit the program. You will "NOT" amend the return at this time.

Now fire up TurboTax 2018 and the first thing you'll do is import the data from the .tax2017 file.  This ensures your 2018 tax return will match exactly the one you actually filed. Then complete the 2018 return exactly as originally filed. Select the "Print and File" option and actually print the return. Again, this tells the program that you have in fact, filed the return. Compare the printed return to the one you actually filed. It should match exactly. Now save the .tax2018 file and exit the TurboTax 2018 program. You will NOT amend the 2018 tax return at this time.

Now fire up TurboTax 2019 and import from the .tax2018 file. As above, this will ensure the imported data will match exactly the originally filed return. Complete the 2019 tax return exactly as filed, then select the "Print and File" option and print it out. This tells the program that you have in fact, filed the return. Completely exit the TurboTax 2019 program. Compare the printout to the 2019 return actually filed. They should match exactly.

Assuming all is good at this point, you're ready to start amending.

Now fire up TurboTax 2017 anew and before you open the actual return, click the Amend button. Then go through the process to amend. You'll just work through the SCH E section as you did before, making your necessary corrections.  Once done, you have no choice but to "print and file" the amended return. The program will only print those forms you actually need to mail to the IRS, along with mailing instructions.  You will mail this 2017 amended return in it's own separate envelope from other amended returns. This will complete the amending process for the 2017 return.

Now it gets tricky, so attention to detail is important.

Fire up TurboTax 2018, and before you open the .tax2018 file click the AMEND button. Take note that when amending a tax return, you can not import from the prior year's tax return. Therefore, the "prior years depreciation" amounts are going to be WRONG. (I guarantee it, since you changed things to 100% business use on the 2017 tax return.)  So as you are working through the SCH E section of the 2018 return, you will manually change the amount in the "prior year's depreciation" box, when presented that screen.

Take special note on just how to correctly figure the prior year's depreciation here, as you will be required to do some manual math on your part.

If you'll take a look at the 2017 IRS Form 4562 that prints in landscape format, titled "Depreciation and Amortization Report" you have to add together the amounts in the "Prior years depr" column and the "current year depr" column on the 2017 form 4562, in order to get the correct total of prior years depreciation to enter on the 2018 tax return.

[tj-21]

Carl,

I had been doing my taxes for a long time on turbo tax, but gave them to an account in 2017 due to the sale of the rental property using the "installment" method and several other changes. I have started to do my own taxes again myself now, and this is when I noticed a mistake. The mistake doesn't affect any taxes, the correct depreciation was used, it was the AMT depreciation calculation that was incorrect. I gave the accountant my prior (2016) depreciation reports, and I never noticed on the AMT Depreciation reports never had the "Prior Depreciation" amounts listed. I went back in the program and found that things done before a certain year didn't provide the prior depreciation, and that I would have to add that. This was only found by right clicking on the prior depreciation box on the asset sheet, where it states this (not obvious). It also stated I would need this prior depreciation when I sold the property. The accountant never questioned me about the lack of AMT depreciation for prior years (22 yrs), and used the AMT amount from 2016 and 2017 only. This only shows up indirectly on 2017 form 6251 line 17 for Disposition of property (difference between AMT and regular tax gain or loss) as a negative number (-$14,465). The calculations on the 2nd page of form 6251 didn't change any taxes or subject me to the AMT. I did go ahead and re-calculated the forms with the correct AMT depreciation numbers on all the forms in the background that the form 6251 references (Schedule D for AMT, Schedule D AMT Tax Worksheet, Form 6252 AMT)  and it doesn't affect the amounts or subject me to the AMT (did this for 2017 thru 2020). I had the accountant do my 2018 and 2019 taxes, and the accountant had me file form 6251(1st page without any amounts for difference between AMT) with my return, again we weren't subjected to any AMT and the 2nd page wasn't provided to show any AMT amounts. Now that I am doing the taxes, it seems that I should have a small negative amount on line 2k of form 6251 for both 2020 and 2021, it's only -$60.00. I'm waiting for form 6252 to be final, but I might have to file form 6251 and I am wondering if I should just start showing the amounts on line 2k that haven't been showing since 2018? I have noticed other posts on the intuit community forums, people say just use the same amount for AMT as the regular depreciation?? Is it a big deal, or do I just start showing the small negative amount  or continue to show no difference??

Appreciate your advice, Thank you!

[tj-21]

Carl,

I other item, Form 8582 was never filed all the years I did my taxes with Turbo Tax, always said to keep them for my records. The accountant that did my taxes didn't produce a form 8582 for 2017 thru 2019 either. I have never had any losses on my rental property since I had owned it. Turbo tax is wanting me to file it now, do I need to file this even though I don't have any losses? Will it look odd to the IRS if I start filing it now or should I not?? Does it really make a difference, I don't have any other passive income, except the installment sale income each year.

Thank you

[Carl]

Is it a big deal,

It's only a big deal "IF" you are subject to AMT tax. From what I see/read in the forums, when it comes to TTX users not that many are subject to the AMT. I know I'm not and never have been. Unless I get lucky and hit the lottery (fat chance of that) I never will be either. For those reasons, I've never really paid much attention to AMT in the IRS pubs. So I'm really not knowledgeable enough on AMT to contribute anything useful on that front. I can best sum it up by saying that I know "just enough" about AMT rules and laws to be downright dangerous. 😋

[tj-21]

Carl,

I had been doing my taxes for a long time on turbo tax, but gave them to an account in 2017 due to the sale of the rental property using the "installment" method and several other changes. I have started to do my own taxes again myself now, and this is when I noticed a mistake. The mistake doesn't affect any taxes, the correct depreciation was used, it was the AMT depreciation calculation that was incorrect. I gave the accountant my prior (2016) depreciation reports, and I never noticed on the AMT Depreciation reports never had the "Prior Depreciation" amounts listed. I went back in the program and found that things done before a certain year didn't provide the prior depreciation, and that I would have to add that. This was only found by right clicking on the prior depreciation box on the asset sheet, where it states this (not obvious). It also stated I would need this prior depreciation when I sold the property. The accountant never questioned me about the lack of AMT depreciation for prior years (22 yrs), and used the AMT amount from 2016 and 2017 only. This only shows up indirectly on 2017 form 6251 line 17 for Disposition of property (difference between AMT and regular tax gain or loss) as a negative number (-$14,465). The calculations on the 2nd page of form 6251 didn't change any taxes or subject me to the AMT. I did go ahead and re-calculated the forms with the correct AMT depreciation numbers on all the forms in the background that the form 6251 references (Schedule D for AMT, Schedule D AMT Tax Worksheet, Form 6252 AMT)  and it doesn't affect the amounts or subject me to the AMT (did this for 2017 thru 2020). I had the accountant do my 2018 and 2019 taxes, and the accountant had me file form 6251(1st page without any amounts for difference between AMT) with my return, again we weren't subjected to any AMT and the 2nd page wasn't provided to show any AMT amounts. Now that I am doing the taxes, it seems that I should have a small negative amount on line 2k of form 6251 for both 2020 and 2021, it's only -$60.00. I'm waiting for form 6252 to be final, but I might have to file form 6251 and I am wondering if I should just start showing the amounts on line 2k that haven't been showing since 2018? I have noticed other posts on the intuit community forums, people say just use the same amount for AMT as the regular depreciation?? Is it a big deal, or do I just start showing the small negative amount  or continue to show no difference??

Appreciate your advice, Thank you!

[tj-21]

Carl,

I other item, Form 8582 was never filed all the years I did my taxes with Turbo Tax, always said to keep them for my records. The accountant that did my taxes didn't produce a form 8582 for 2017 thru 2019 either. I have never had any losses on my rental property since I had owned it. Turbo tax is wanting me to file it now, do I need to file this even though I don't have any losses? Will it look odd to the IRS if I start filing it now or should I not?? Does it really make a difference, I don't have any other passive income, except the installment sale income each year.

Thank you

[Carl]

I have never had any losses on my rental property since I had owned it. Turbo tax is wanting me to file it now, do I need to file this even though I don't have any losses?

You very well may have a loss, as it's not common for long term residential rental property to show a profit -  especially if there's a mortgage on it.

Due to changes with the TCJA in 2018, you can now deduct a maximum of $25K of those passive losses that exceed your passive rental income, against other ordinary income - provided of course you have the otherwise taxable other ordinary income to claim it against and deduct it from.

Take a look at the 8582. Is there an amount on line 3? If so, file the form.

Basically, if you are e-filing the return, the program will e-file all forms required by the IRS. If you elect the option to "print and mail" the return the program will print only the forms required for filing, if the program prints it, then mail it.

Will it look odd to the IRS if I start filing it now or should I not?

Humans are not perfect. If things are wrong on a tax return the IRS is not going to send down unmarked black hawk helicopters to bag and hogtie the tax filer, take them back to DC and drop them into the IRS dungeon because they made a mistake. (A bit dramatic, I know😋)

There's nothing special to be concerned about here. it's kinda like you're getting worked up about nothing. Remember, in today's world it's highly unlikely a human will ever lay eyes on your return, unless the computer that processes it has a reason to flag it for human review. Generally, those reasons pertain to honest mistakes, far more than they do intentional tax fraud. Oh, and even the computer screws up at times too!

Even with honest mistakes, it's the computer that generates the letter one gets in the mail. A human only becomes aware of it when one of two things happens.

1) If you don't respond to the letter within the time frame allotted, a human at the IRS is most likely made aware of this. What they "do" when they become aware, I really don't know.

2) The so-called "error" the computer flagged on your return is either not an error, or was incorrectly flagged as an error because of incorrect reporting on the tax filer's part. When you mail or fax your response and supporting documents to the IRS, a human has to bet involved to either agree or disagree with your respons and adjust your tax return in their computers accordingly.

Keep in mind that when the IRS computers flag tax returns for errors or whatever, it is not automatically assumed you are being malicious. In fact, it's quite the opposite and is assume to just be a mistake on the tax payer's part. Most of the time, it's a tax payer mistake. But there are a fair number of times it's an IRS mistake. You know the old saying.... STUFF HAPPENS.

Now if you're concerned, you can always buy Audit Defense for the 2021 tax return. You'll be offered that option once you complete your return, when you start the actual "filing" process.

[tj-21]

Carl,

It was a non-residential property, never had a loss. I paid it off very early on, but I always had positive income. There is nothing on form 8582 except net income amounts, no losses

[Carl]

That's not at all unheard of on non-residential/commercial rental property. But like I said, if you're mailing the return and the program prints the form when you select the option to print forms required for mailing/filing, then make sure you include it.

Also, I believe it's about 3 screens into the property profile section, check to make sure you've identified the property as commercial, and not one of the residential options on that screen.