How to add Forex transactions to PA Schedule D when those transactions are not in 8949?

[mAMYiyVS1e]

According to the following discussion, Forex transactions that are subject to Section 988 should be reported on 1040 schedule 1:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-do-i-report-foreign-exchange...

On the other hand, according to the following document, such Section 988 transactions are to be reported on PA Schedule D:

https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Gains-Losses-Sale-Exc...

However, if you report Forex transactions on Schedule 1 with TurboTax, such transactions would not be automatically entered into PA Schedule D. In addition, TurboTax does not allow you to add new transactions in the state tax return.

What should you do in this situation??

[MonikaK1]

When you complete the Pennsylvania state interview, TurboTax will ask questions about each type of income that may need to be reported differently on that state's return. 

Watch for this screen to appear: 

TurboTax will ask additional questions needed to properly report information about transactions reported under Other Income in the Federal section. 

See here for information from the Pennsylvania DOR regarding the differences in capital gains reporting. 

[mAMYiyVS1e]

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@MonikaK1 wrote:

When you complete the Pennsylvania state interview, TurboTax will ask questions about each type of income that may need to be reported differently on that state's return. 

Watch for this screen to appear: 

TurboTax will ask additional questions needed to properly report information about transactions reported under Other Income in the Federal section. 

See here for information from the Pennsylvania DOR regarding the differences in capital gains reporting. 

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Thanks! I know there is a screen for PA return that allows you to make changes to the adjustments (e.g., wash sale adjustments are not applicable in PA) on each transaction. But it does not seem to allow me to add an entirely new transaction.

[MonikaK1]

We will investigate this issue further. In order for us best to troubleshoot this issue, you can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions for TurboTax Online users: 

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

If you are using TurboTax Desktop please comment back and I will give you those instructions.

[mAMYiyVS1e]

@MonikaK1 

I was using the Desktop version, but this issue can be easily replicated on the Online version as well.

The token number is 1099725.

Here are the steps to reproduce:

1. Create a new federal return

2. Enter a test stock sale (1099-B) with $900 profit

3. Enter -900 as the amount and "Section 988 Forex loss" as the description in Federal Taxes -> Wages & Income/Income & Expenses -> All Income -> Less Common Income -> Other Reportable Income

4. Finish your federal return, and start a PA return

For PA return, "Section 988 Forex loss" should be entered as a new transaction in schedule D. This was clearly stated in the link I shared in my original post. The relevant paragraph is as follows:

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IRC §§ 987 and 988 Foreign Exchange Gains and Losses

Gains and losses from foreign currency exchange transactions are reported as Schedule D transactions for Pennsylvania personal income tax purposes.

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However, TurboTax does not allow you to enter a new entry in PA schedule D, it would just copy whatever entries from 1040 Schedule D. You are allowed to make PA specific adjustments to each transaction, but you cannot add a totally new transaction that was not present in 1040 Schedule D.

Note that you cannot just adjust the test stock sale to make the profit $0, because the Section 988 Forex loss is a separate transaction that is different from the test stock sale, so both transactions should be reported separately. In addition, according to here, you cannot add Section 988 Forex loss to the 1040 schedule D either, because these losses are treated differently from normal capital losses for federal tax return purposes. Only for PA tax return, section 988 Forex loss is treated the same as other capital losses. So what we want to achieve is to add the section 988 forex loss to PA Schedule D but not to 1040 Schedule D. This is currently unachievable with TurboTax.

[AnnetteB6]

Thank you for providing the token number to take a deeper look at this situation.  The issue has been reported, but may not be resolved before the tax deadline.  

Here are some steps you can try after entering the Forex loss so that it is reported on Schedule 1 where it should be reported:

1 - Enter a stock sale in the Investment Sales section of your Federal return that will also report this sale.  

2 - Go through the PA return so that the stock sale information from the Federal Schedule D will transfer to the PA return.

3 - Go back to the Federal return and delete the extra Schedule D stock sale.  This should leave the Schedule D that was created in the PA return intact but without any details.

4 - Go through the PA return and edit the stock sale information that needs to be reported on the PA Schedule D.  

If this workaround is successful, please let us know.  

@mAMYiyVS1e