net investment income tax form 8960

[Anonymous_]

Have you tried the Form 8960 Worksheet?

[Anonymous_]

Note that adjustments/deductions not on the 8960 Worksheet are not supported.

See https://digitalasset.intuit.com/DOCUMENT/A51oKyg2O/032522-2021-unsupported-calcs-L1FQfTTgn.pdf

[64dancer]

Since 8960, Line 7 is to be used in the year of the recovery, I am not sure I know which recovery. State or Federal?

I received my state tax refund in 2021 for 2020. I received my federal tax refund in 2022 for 2020. Since Form 8960 is for Federal taxes, I assume they are telling me to put this recovery on my 2022 taxes since that is the year I received my 2020 Federal refund.

Am I correct?

[Anonymous_]

You need not do anything with your federal refund as it is irrelevant.

[64dancer]

So the recovery does go on my 2021 tax return? It is not when you actually receive the refund?

[Anonymous_]

See https://www.irs.gov/instructions/i8960#en_US_2021_publink10003343

[64dancer]

I have read the instructions several times. It states on page 11: "Deduction recoveries. A recovery or refund of a previously deducted item increases net investment income in the year of the recovery."

It does not state whether it is the recovery of the state income tax refund or the federal income tax refund. I would think it is the Federal Refund (I received the 2020 federal refund in 2022, not in 2021 as I should have) since I am doing my federal tax return, but line 7 is actually for the recovery of state income tax, which makes the answer completely unclear since the tax instructions do not spell it out.

[64dancer]

Also, the instructions ask for the total amount of the recovery.

    I received $7193 as state tax refund for 2020. Is this the recovery they are asking for?

    I deducted $3495 off NIIT in 2020. Is this the recovery they are asking for?

    I multiplied the $3495 by 3.8% = $132. I owed $132 less of NIIT for 2020. To me, THIS $132 is my recovery.

Can you interpret which "recovery" the instructions are asking for?

[tacopa]

If I am taking standard deduction of $25,100, will I be able to deduct State Income Tax attributable to the Investment Income, and put it in 9b of 8960?

I calculated the State Income Tax with and without the Investment Income (interest, dividend, sales). I took the diff in State Tax (with & without investment income).

Is this allowed if I am not itemizing, but just taking Std deduction?

[MarilynG]

The 'recovery' is not r elated to either your Federal or State Tax refund.

It's related to a deduction you previously took for a business bad debt, for example, but now were able to 'recover' the amount you previously deducted.

Click this link for more info on Recovery of Items Previously Deducted. 

@64dancer

[MarilynG]

The Investment Interest Expense is an itemized deduction on Schedule A, so you wouldn't be able to claim this if you are using the Standard Deduction.

Possibly your state may allow you to take the deduction without itemizing. 

Click this link to check your state's Dept. of Revenue site for more info.

@tacopa

[rollsrules]

I keep getting my E-file rejected due to form 8960.  I have tried deleting the form and it keeps putting it back in. I can't get to the form to "0" it out.  Does anyone know how I get to the form?

[JohnB5677]

This error refers to Form 8960 Net Investment Income Tax Individuals, Estates, and Trusts.  The issue is known by the IRS and there is a resolution date of 2/7/2023.  Once fixed by the IRS, TurboTax will make their adjustments.

IRS Forms & Instructions revision dates

@rollsrules

[rollsrules]

Thx. I gave up and mailed them in