How do I indicate a QSBS section 1202 exclusion? I found an answer for how to do this for tax year 2019, but it doesn't seem to work in this year's version.

[jhostetter]

Where do I even put in a stock purchase date?  I havent put in a date at all, the system only asks for if I have held the stock for more than a year.  

[wideglidejrp]

All that is true for TT2022 but it doesn’t work in TT2023. Big problem.

[MonikaK1]

In order for you to be able to enter the information needed to report the QSBS Section 1202 transaction correctly, you can report the sale of qualified small business stock under stock sales to indicate that the sale was "qualified small business stock."  You can follow these steps in the 2023 version of TurboTax:

1. Click on Federal Taxes > Wages & Income> I'll choose what I work on
2. In the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other. 
3. If you have already entered some investment sales, you will see a screen Here's the investment sales info we have so far.  Click on the Add More Sales link.
4. If you haven't yet entered some investment sales, you will see a screen Did you sell any investments in 2023?  Click the Yes box.
5. Answer No to the question, Did you get a 1099-B...? if that is the case. If you received a different information return, enter that in TurboTax as well, but with a negative amount to counter a positive amount in the stock section.
6. On the screen, Choose the type of investment you sold, mark the button for Stocks and click Continue.  
7. You will be asked questions about the date of sale and purchase and the cost and sales price.  
8. When you come to the screen, "Let us know if any of these situations apply to this sale", check the box next to Small Business Stock and click Continue.

Several more screens will appear with follow-up questions needed to determine whether the sale qualifies for the Section 1202 exclusion for small business stock.

The Learn More link for Qualified Small Business Stock explains:

When you sell qualified small business stock for a gain, you may be able to postpone paying income tax on the sale if you used the proceeds to purchase other qualified small business stock under section 1045 within 60 days.

If you didn't buy other qualified stock, you may qualify to treat 50%, 75%, or 100% of the gain as tax-free under section 1202 if you held the stock longer than five years, depending on when the stock was acquired.

[wideglidejrp]

What you described is what I have been doing for the last few years. HOWEVER, TT2023 does not have the provision and questions for QSBS/1202 sales. Prior to TT2023, it would ask you questions about the stock: how many years, U.S. company, etc. I cannot find those questions in TT2023. This is a huge issue for me as I have several significant 1202-qualifying sales.

[MonikaK1]

I have followed the steps mentioned in TurboTax Online and was able to generate the 1202 exclusion. If you check the box "small business stock" it asks "what kind". If you select 1202 eligible for exclusion, it asks if you previously sold small business stock from the same corporation and need to adjust the gain eligible for exclusion. It didn't specifically ask the number of years but it gets that from the acquisition and sale dates.

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 what you are seeing and we can determine what is going on in your return and provide a resolution.

 Here are the instructions for TurboTax Desktop users:

1. From the black bar at the top of your screen, select Online
2. Click Send Tax File to Agent
3. Click Send on the message that pops up
4. TurboTax will create a "sanitized" copy of your return information with no personal info
5. Post the 7-digit token number here in this thread

[PM20231]

How do I make a IRS Section 1202 exclusion in TurboTax 2023?  I was able to do that in TurboTax 2022 and previous versions!

[KrisD15]

The Desktop program offers Section 1045 which you must first select, 

after entering zero for replacement property, the program will default to section 1202. 

DESKTOP-

       Federal 

Wages & Income

Investment Income

Stocks, Cryptocurrency, Mutual Funds, Bonds. Other

Start or Update or “Add more sales” 

Select  “Stocks, Bonds, Mutual Funds (1099-B)”

Skip Import, Select I'll type it in myself and enter Bank or Brokerage and CONTINUE

Select No for Employee Stock

Select No (1-3) for More than three sales

Select Yes for “Other types of investments”

Select Yes for “Did you buy every investment?” and CONTINUE

Select One-by-one for “Now, choose how to enter your sales” and CONTINUE

For the Sales section drop-down choose “Short-term or Long-term did not receive 1099-B”

For Type of investment, Select Stock (non-employee)
Enter Description, Dates, Sale Proceeds, and Basis and CONTINUE 

Select “This is a small business stock” for the “Let us know if any of these situations apply to this sale”, screen and CONTINUE

Select “I don’t want to make any changes to my cost basis right now” and CONTINUE

Select Qualified Small Business (section 1045) on the “What kind of small business stock did you sell?” Screen and CONTINUE 

Enter zero for the cost of new qualified small business stock and CONTINUE

The next screen shows this as 1202 sales since no replacement was purchased. 

[ynliu]

I imported my 1099-B directly from brokerage company.

In TT2022, it will my QSBS question and it will put 1202 exclusion and do the adjustment in the 8949 form to reflect QSBS deduction. 

In TT2023, it seems missing this automatic feature an adjustment for 1202 and 8949.

I have many QSBS sales, and I wish I can get this feature back on my TT2023 Premier. 

Will this be fixed SOON?

[RobertB4444]

To be clear, you're saying that in previous years you imported the statement from your brokerage and it automatically generated a 1202 exclusion where applicable and that this year it is not automatically generating that exclusion.  

That feature should still exist in the 2023 software.  It does not appear to be disabled.  But a lot of features have some difficulty operating when importing large broker statements.  You should definitely go through and double check the automatic entries.

@ynliu 

[daves95409]

I have been trying to enter a QSBS sec 1202 stock sale on 2023 Turbotax desktop on a Mac.

I searched this forum, and followed every instruction, but cannot get to the page that asks me what percentage is excluded.

I called the support line (twice) and they watched me on "screen share" and they could not understand why it wasn't working.

Here are the steps I take:

1) From Wages & Income -> Investment Income I click "Update" next to "Stocks, Crypto..."

2) I click "Add more sales"

3) I select "Stocks, Bonds..." and click Continue

4) I select "Skip this import"

5) I enter "Bank or brokerage" as Vanguard Group (leave other fields blank)

6) I select "No" for "Do these sales include and employee stock"

7) I select "No" for "Do you have more than three..."

😎 I select "Yes" for "Do these sales include..." (even though I don't I should - but previous post said to)

9) I select "Yes" for "Did you buy every investment..."

10) I click "Continue"

11) I select "One by one" and then click "Continue"

12) I click Continue on the useless page

13) I enter "Long-term did not receive 1099-B form", "Stock (non-employee), Description "100 Foo", acquire date "01/01/1999", Date sold "05/01/2023", proceeds "$1,000", Cost "$100" then click "Continue"

14) On the "Let us know if any of these..." screen I select only "This was a small business stock", then Continue

15) I select "I don't want to make an changes...", then Continue

16) I select "Qualified small business ... (section 1202), then Continue. [And I have also tried the section 1045 with a $0 purchase price].

17) $0 for previous sales of this stock - NOTE - this page is very ambiguous. Is it asking for the dollar amount that is eligible to exclude for this sale? Or is it asking how much I have sold in the past so it can determine if I have reached the $10,000,000 limit?

18) Now it kicks me to back to the "Review your Vanguard Group sales page (same as #2 above).

In Forms, the "Capital Gain (Loss) Adjustment Worksheet" in Part III has an X in "Gain from this Qualified..." and an X in "This QSB stock is eligible for 50% exclusion under section 1202", but the amount excluded is 0.

If I enter an amount here, it excludes half the amount, but it appears to include that amount somewhere else and my tax is not reduced by the correct amount. I have not tracked this part down.

Help???

[DaveF1006]

In reviewing this, I notice a fundamental flaw in the Desktop version of Turbo tax. I need to request a diagnostic copy of your return so i can forward the issue to our software investigative team.

To look at this in detail, we would like to see a diagnostic copy of your return. The information in this file is a sanitized copy meaning there is no personal information, only numbers so that we can troubleshoot in depth, check for calculation issues, and to see how certain items are applied. Here is how to order. 

For Turbo Tax online, go to tax tools>tools>share my file with agent.  When this is selected, you will receive a token number.  Respond back in this thread and tell us what that token number is. 

If you use the desktop version, go to the black stripe at the top of the program>online>send tax file to agent. Once you receive the token number, reply back in this thread and let us know what that token number is.

[DaveF1006]

Myself and my colleagues did a thorough software investigation and came up with the following conclusions.

• The first 15 steps are correct.
• The sixteenth step, Section 1202 is the option to choose.
• In the amount that is asking how much can be excluded. Here you will put 50% of the gain, which should be $450.

If you find your tax hasn't been reduced, it means your capital  gain was never taxed in the first place. This is a long-term capital gain and any long-term gains under $44,625 are taxed at 0%.  Any exclusion of capital gains will not make a difference in your return.

Please disregard my previous post. We don't need the token.

@daves95409 

[daves95409]

Thank you!

I misinterpreted what Turbotax was asking for in step 17 in my post.

When it asks "Let us know if you need to adjust your gain for exclusion" it is really asking for the amount that is eligible for exclusion. There's no adjustment here... just enter the amount of the gain that qualifies for the section 1202 exclusion.

[todd_1475]

I FOUND A WORKAROUND FOR THE 2023 QSBS GLITCH. Entering QSBS info is broken in TT 2023. If you follow the program's procedure the result on Form 8949 is no gain adjustment: i.e. you are paying full tax on the QSBS income. 

This approach works. In the step-by-step procedure for manual stock sales, enter the stock sale info for the QSBS shares as if they were not QSBS: on the screen where the "this is small business stock" check box occurs, ignore that check-box and instead check "none of the above" at the bottom of the list. Complete entry of all of your QSBS stock sales. 

Then, switch to forms mode, and find the Form 1099-B worksheet that contains the stock sales that should be QSBS. Under this worksheet in the forms list you will see a Capital Asset Sales worksheet: open this. You will see a section for each of you stock sales. In each of these sections, make two edits. 1) in the "adjustment amount" box for each sale enter the amount by which the gain on that sale that should be reduced as a negative number. 2) in the "adjustment codes" box enter "Q" (without the quotes"). Now go the the copy of Form 8949 that contains these stock sales, and you will see that they appear correctly: the adjustment reduces the gain per QSBS rules and the correct adjustment code Q is displayed.

Also, if your QSBS income comes from a K-1, there is another glitch. QSBS income appears on K-1 line 11. If you enter the line 11 income into the TT K-1 input form, the line 11 income (i.e. QSBS) income is included in the Schedule E income totals. This means you are taxed on this income as ordinary income. Hence you need to leave line 11 on the K-1 entry form blank and enter the QSBS income into the Capital Asset Sales worksheet as described above.

Todd Hixon

Long time TT user, rather disappointed with TT-23

[slydog32]

Does anyone have confidence in TurboTax's ability (desktop deluxe version) to handle K-1s with QSBs? I have QSBs for both line 9A (net long-term capital gain) and line 11O. I have yet to get someone on the phone with TurboTax who can tell me how to enter the QSB exclusions. And now I am reading that line 11O is being taxed as ordinary income in the system? HELP.