NYS IT-182 NON RESIDENT

[jnoelle]

Does TT properly calculate PAL from NY rental real estate for non-resident on form IT-182? 

Specifically, the form instructions for PART II -Special Allowance for Rental Real Estate Activities With Active Participation- to use  NY AGI (not FEDERAL) to calculate the passive activity loss (PAL)

I have seen limitations on other software on this item.

tia

_____

TO SAVE YOU FROM READING THE WHOLE THREAD - TT does not calculate this properly. Final post on this topic from TT says "state passive activity loss calculations are not supported in the product. "

[MarilynG1]

New York State Tax Law conforms to the passive activity loss rules for federal purposes. However, any deduction for a passive activity loss (PAL) for a nonresident or part-year resident must be recomputed to determine the amount that is allowed if the federal adjusted gross income took into account only items of income, gain, loss, or deduction derived from or connected with New York sources.

It is possible, because of the above rules, for a nonresident to have a PAL for New York State without having a PAL for federal purposes, or to have a New York State PAL that is larger or smaller than the corresponding federal PAL. 

In Part II, Line 6, enter your Federal modified adjusted gross income using only those amounts derived from or connected with New York sources.

Here's more detailed information and instructions from the New York Dept. of Taxation to help you. 

[jnoelle]

I am familiar with the IT-182 form instructions for non residents. My questions is specifically regarding the TT software behavior.

**Does TurboTax has the ability (eg fields/calculations) to determine the amount in the software for a NY non resident whose only NY income is real estate  NOL

**if it can not determine the amount, is there a place to enter an override value ?

[jnoelle]

I have paid for TurboTax desktop and it is NOT properly calculating PART II -Special Allowance for Rental Real Estate Activities With Active Participation- to use  NY AGI (not FEDERAL) to calculate the passive activity loss (PAL) on NY IT-182

Who do I contact to fix this software error?

I am a non resident and per NY IT-182, the entry should be NY source income.

TT is using an incorrect NY AGI on that form, which is incorrect.

However, if you preview the worksheets for the state return, the NY Part-Year Resident/Nonresident Allocation Worksheet 2023 is correct. so TT knows the value but is not using it! 

[AnnetteB6]

In order to take a closer look and report this as a possible software issue, it would be extremely helpful to have a diagnostic copy of your tax file.  The diagnostic file will not contain any personally identifiable information, only numbers related to your tax forms.  All personal information is redacted with 'xxx'.  If you would like to provide us with the diagnostic file, follow the instructions below and post the token number along with which version of TurboTax you are using in a follow-up thread.

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

@jnoelle 

[jnoelle]

@AnnetteB6

 I called in earlier in the week and sent a santized return to TT already

token number : 1165143

running desktop TT Premier

FPS 4.6.1.2 (null)

build date: Jan 27, 2024 at 12:45:19 PM

application: 2023.r16.021

2023 tax return, I am NYS non resident. only income is rental income, which has PAL 

If you preview NYS return,  the NY Part-Year Resident/Nonresident Allocation Worksheet 2023 looks correct for income 

HOWEVER , the following are incorrect 

*Tax summary button on App shows incorrect NY AGI. Per NYS tax law 631, it is only NY source income.

*NY form IT-182 then uses the incorrect NY AGI on PART II line 6.

*the calculations on form IT-182 are incorrect because of this.

*The incorrect NY AGI may be elsewhere in the return, I have not looked

My income is NOT W-2 , but foreign sourced and entered as such. It may simply be that the incorrect NY AGI fails to exclude that field and is only looking at W-2 income.

Not yet queried, but in form IT-182, Part IV – For Part I, lines 1a, 1b, and 1c how do you enter prior year PAL? State values are different from federal.

lmk if you can not access the santized return and I will resend. 

How will I be updated on this issue?

the case I had opened previously [phone number removed] is now closed, but I have not received any update. Is there a new way to track this issue please?

[jnoelle]

@AnnetteB6 I was asked to send another santized file- the new token number is: 1167609

[AnnetteB6]

Going through the diagnostic copy of your return, there are a number of errors or issues that will need to be cleared before you will be able to file your return.  Here are some steps to take to fix and remove these issues:

1. Was there any interest income that should be allocated to NY? If not, enter zero on the Addition and subtraction allocations screens for NYS. This is found under Nonresident and PY resident adjustment allocations. I assumed NY portion is zero. 
2. Complete all the allocations necessary on NYS screens. If none, enter zero.
3. Remove the NYS portion of rental, royalties, partnership of -3,900. The federal income side shows 0, therefore, enter 0.  Remember, this is allocating what is being reported on the Federal return to NYS, not reporting something other than what is shown on the Federal return.
4. Enter your resident county on NJ return. 
5. Complete the Health Care Coverage section of your NJ return.
6. Review the foreign wages again. I’m assuming you don’t qualify for the exclusion and answered questions accordingly. Form 2555-T will be deleted. 
7. For wages and taxable SS benefits, I’m assuming zero was sourced to NYS. If so, enter zero for these fields.

Next, addressing your questions:

1 - Federal forms and worksheets show a loss of 6,403 for the NY property. If you have any passive real estate activity losses from a prior year, you need to go to the Rental Income and Expenses section of your Federal return and edit the Property Profile.  On the page titled, Do Any of These Situations Apply to This Property, check the box under carryovers for passive activity losses and enter the accurate information from prior years. 

2 - After you have entered any prior year unallowed losses on the Federal return, then that amount and the 6,403 unallowed loss from 2023 will both flow to the NY IT-182 form.

3 - It is not possible to see what the app is stating when you see your return, but the forms in your data file state that for NY state your adjusted gross income is zero. This makes sense if the loss is unallowed and there is no other income allocated to NY.  

4 - Form IT-182, Line 6 shows your federal MODIFIED adjusted gross income. It is calculating your federal AGI less taxable social security benefits. Since this amount is over the allowed limitation on the form, you do not qualify for special allowance with active participation. 

5 - To adjust your NYS carryover to a value that is different from the Federal unallowed loss carryover, enter the appropriate amount on Line 6 of Part II on the IT-182 worksheet. This will transfer to the IT-182.  This will need to be done in Forms mode using the TurboTax CD/downloaded version of the program.  There is not a direct entry for this amount in the step-by-step mode of the NY state return.

 @jnoelle 

[edited 2/4/2024 | 5:04 am PST]

[jnoelle]

thanks @AnnetteB6 

i've taken a 1st pass at your instructions - and will review more closely. thank you for your response.

so regarding your replies, which are in blue below

1. For wages and taxable SS benefits, I’m assuming zero was sourced to NYS. If so, enter zero for these fields. -- WHERE DO I ENTER ZERO ?  there are no NY state interview questions for this. am I supposed to open a form?  

If you look at the Part-Year Resident/Nonresident Allocation Worksheet 2023- column D, it is already correct. why do I need to enter anything further?  

As I said above, I think the software is using the wrong data 

-3 - It is not possible to see what the app is stating when you see your return, but the forms in your data file state that for NY state your adjusted gross income is zero. This makes sense if the loss is unallowed and there is no other income allocated to NY.  

agreed that my NY agi is zero.

the app is NOT showing zero, which is why I reported this as a bug at the outset. Shouldn't the app reflect the forms?

4 - Form IT-182, Line 6 shows $166,680. This is your federal MODIFIED adjusted gross income. It is calculating your federal AGI less taxable social security benefits. Since this amount is over 150,000, you do not qualify for special allowance with active participation. 

The $166,680 number is wrong as I have been saying all along.

on the NY form instructions and as your colleague points out in the 1st response on this thread --

NY form IT-182 Line 6 for  non resident should be "In Part II, Line 6, enter your Federal modified adjusted gross income using only those amounts derived from or connected with New York sources.

This number should not be $166,680. it should be 0 in my case

this is also a bug

feedback on this appreciated

[AnnetteB6]

After reviewing this further, a report is being submitted to the development team for review.  This will take some time before the result of further investigation is known.

We will give you another update when the results are known.  

@jnoelle 

[jnoelle]

I look forward to hearing back @AnnetteB6

Once investigated, please let me know if a fix is expected before April 15 or not. 

[AnnetteB6]

Just letting you know that the result of the further investigation into this situation is that it was confirmed to be using the incorrect amount on NY Form IT-182 line 6.  However, it has been determined that allowing the user to edit line 6 should be a program enhancement added at a later date.  It is not known to us what that later date might be. 

@jnoelle 

[jnoelle]

@AnnetteB6 thank you for the update.

I am confused that the proposed solution is "allowing the user to edit line 6".

Shouldn't the solution be to correct the calculation/value being used for NY AGI for non residents to conform with the NYS tax law?

this is the error - we agreed above  that my NYI AGI is zero, but the software uses an incorrect number

I look forward to your reply

[AnnetteB6]

The additional details shared after the request was sent to the developers is that state passive activity loss calculations are not supported in the product.  So when it is determined to not be supported, it will not be changed or corrected.  The best you can hope for is that at some point in the future the information on line 6 can be edited.  

@jnoelle