NOL carry forward not showing on CA 541 return

[FT628]

I am preparing 2024 return for a Special Needs Trust (SNT) and using Turbo Tax Business 2024 (the SNT started in 2023).  There were NOLs on a K-1 issued to the SNT in 2023,  The SNT did not have any income in 2023 so none of the NOLs were used.  

I am starting to prepare the 2024 SNT return and the Federal 1041 shows the correct NOL from 2023 (where it was used to offset 80% of the 2024 income)  and the NOL carryforward to 2025 is correct.  When I review the California 541 documents, the "Carryover Wks" documents do not show any NOLs.  The California income is less than $2,000 and is below the threshold of being able to use NOLs.

Does anyone know why the NOL balance is not correct (whereas the Federal NOL is carrying forward correctly)??

[maglib]

@FT628

California S.B. 167 adds corporate tax and personal income tax statutes which suspend the use of NOLs for most California taxpayers for tax years beginning in 2024-2026 unless they qualify for limited small business exceptions. To the extent that the NOL utilization is suspended by the new statutes, a corollary extension of the NOL carryover period is provided for each year of disallowance. For purposes of the corporate tax, the NOL suspension does not apply if the taxpayer has income subject to corporate tax of less than $1 million for the taxable year. For personal income tax purposes, the NOL suspension does not apply if a taxpayer has either “net business income” or “modified adjusted gross income” of less than $1 million for the taxable year.

As amended by S.B. 175, the NOL suspension for corporate tax and personal income tax purposes will not apply for the 2025 and 2026 tax years if the California Director of Finance determines that the general fund money over the multiyear forecast is sufficient without the revenue from the NOL suspension and credit limitation, and there is legislation in the annual Budget Act to not apply these provisions.

[FT628]

Hi maglib,

Thanks for the quick response.  I am aware of the suspension but the 2024 income of around $2,000 is enough to meet the suspension threshold (of $1,000,000) and, as such, I expected the NOL from 2023 to offset some of the $2,000 earned in 2024. 

Even if the suspension applied, I will expect to see a CA 541 schedule with the correct NOL from 2023.  Like I mentioned in my original message, the Federal 1041 NOL schedule has the correct balances but the CA 541 schedules has no NOL beginning balances or ending balances.  I guess I am baffled why TurboTax correctly tracks NOL for Federal return but  can't track the NOL balances for California.  Am I missing something or am I expected to manually enter the beginning NOL for CA 541 return???

[maglib]

@FT628 I did a little more research.  i don't work for TT so please I'm just the messenger.

California Form 3805V isn't supported by Turbotax.  You can download it from the FTB and file by mail with your printed TT return. California calculates the CA NOL amount separately from the federal NOL. Therefore, the federal amount is always added back to CA income on Schedule CACA line 8a. If there is a calculated CA NOL amount, the CA amount is shown as a subtraction on Schedule CACA, line 9b2.

See this TurboTax forms availability tool.

Use the following steps to enter your Federal NOL Carryover from last year in TurboTax Online:

• On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner) 
• This opens a box where you can type in “NOL” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
• The search results will give you an option to “Jump to NOL”
• Click on the blue “Jump to NOL” link and enter your information.

Note, if you did your taxes last year with TurboTax and generated an NOL carryover, then in many cases, TurboTax will carry over the NOL automatically to the next year. Check for this in case it appears that your NOL carryover is being double-entered in your 2023 tax return.

See IRS Publication 536 for more information about NOLs. 

TurboTax will determine your current year Federal Net Operating Loss (NOL) and this amount will flow automatically to the Federal Carryover Worksheet. HOWEVER, THE PROGRAM DOES NOT SUPPORT THE CALCULATION OF NOL CARRYOVERS. THIS INCLUDES THE 80% LIMITATION PURSUANT TO THE TAX CUTS AND JOBS ACT.

[FT628]

Hi maglib,

Thanks for the info.  I did use TurboTax last year and after some research and rechecking the  2023 return (created by TurboTax), it looks like California Form 3805V (for NOL) was not automatically prepared by TurboTax.  I needed to identify this additional form in order to have TurboTax fill it out.  

I made a copy of my 2023 return and had TurboTax prepare form 3805V to see if everything will work out BUT it looks like  the  "Final Year Deductions" on line 11-c (on a K-1 I received) still did not get carry forward.

 As of right now, it looks like I need to figure out why K-1 line 11c does not show up as a loss carryforward and, after I figure that out, I need to amend the 2023 return to include form 3805V.

I really appreciate all your help and hopefully someone at TurboTax can tell me why the NOL is not carrying forward for CA state.

[maglib]

@FT628  sadly as there was no 3805V that is why it didn't cfwd for CA.   Look at your carryforward information and see if you can update the information.  i do not have a CA return to access. It is easier in desktop versions.

Did you go through the CA return completely as in other states during the interview it will ask about state NOL carryforwards.

I know the federal you can Type 'nol' in the Search area, then click on 'Jump to nol'.

You can enter your NOLs in TurboTax Online by following these steps:

1. Within your Federal return, click on Income & Expenses at the top of the screen.
2. Scroll down to Other Business Situations and click Show more.
3. Choose Start on the line for Net Operating Loss/QBI Carryforward Loss and progress through the interview.

[FT628]

Hi maglib,

Thank you for all the assistance.  I fixed the problem by going back and manually filling out the Form 3805V in TurboTax and amending the 2023 return.  I read on-line that TurboTax (either intentionally or unintentionlly) did not automatically brought up the Form 3805V for the taxpayer (you had to manually figure it out).

This design flaw in TurboTax is very costly to those of us that has a NOL on CA.

[maglib]

I'm glad it worked out for you.  TT does not support a number of forms. I don't work for them, I just try to help others.  Awesome you had the know how to fix prior year.

[FT628]

Thanks for all your help.  I am just disappointed that TurboTax didn't automatically pull up the form so the customer didn't lose the NOL carryforward.

TurboTax charges a lot for their  software and they need to be proactive in fixing these types of issues (which customers have complained about in previous years).

[One4uTwo4me]

I have a very similar situation preparing yearly tax returns for a Complex Trust with a very large grandfathered in NOL loss that is not subject to the 80% rule. For 5 years now, Turbo Tax does not automatically include the CA Form 3805V and like you,  I have to manually add the form. Turbo Tax attempts to enter amounts on the appropriate lines on this form, but I'm finding I have to override two of them because there are not correct. For example, it enters income in Section A designed for "California Residents Only" and this trust has an address in Oregon. I also have to edit the amount of "NOL Used in 2024" in Part III, Line 2(f). 

I'm also finding that Turbo Tax doesn't enter a correct Adjusted Total Income on Form 541, Schedule B line 1. This line should come from Side 1, line 17 but TT enters the Net Gain/Loss from Schedule D. For 5 years now I've had to override this line. 

Bottom line, I don't have answers to your specific questions but I feel your frustration.