Form 1120s Line 17 reduced by Form 8881 Credit...

[NewUser123456]

Potential bug...

I just bought TurboTax Business and am filing form 1120S.

I offer 401k to my employees and paid $500 for the servicing/administration/setup of the 401k. I do not offer matching to employees.

* I filled line 17 on my 1120s with 0 => I did not match/contribute outside of employees contribution.

* I claimed Small Employer Pension Plan Startup Costs for half of the $500 per instructions ($250) as this was my first year offering 401k.

However when I run "Error Check" on TurboTax, it seems it files the $250 under 1120s line 17 as a -. So in the "worksheet" it does 0-250=-250. Which is an error.

Pretty much TurboTax assumes that any Credit from Form 8881 MUST BE also claimed under line 17. However that's just not true, as line 17 holds only Employer Contribution and NOT Plan Administration Costs...

HELP!

[Anonymous_]

You will probably have to contact Support for this issue as it would be difficult to troubleshoot this type of anomaly on this forum.

See How do I contact TurboTax? (intuit.com)

[ThomasM125]

If you right click on the Pension, Profit-sharing, etc., Plans Smart Worksheet in TurboTax above line 17 of form 1120-S page one, you will see an option that says About Line 17a. If you click on that link, you will see in the instructions to the worksheet that you are to enter pension plan expenses on line A of the worksheet. Then, the expenses will be reduced by the amount used as a credit and the balance will appear on line 17 as part of your pension plan expense deduction.

Although the credit is limited to $250, the balance of the costs are deductible as pension costs. So, the $250 credit is reflected on schedule K and consequently schedule K-1, and the remaining deduction is reflected on line 17 of form 1120-S, page one.

I read the instructions to line 17 and they do not mention adding the pension costs in with the contributions, but it appears TurboTax has taken the position that that is where they should be entered on the tax return.

So, enter $500 on row A of the worksheet above line 17 and you should be fine.

[NewUser123456]

@ThomasM125 thank you for your detailed response (and being the first one that understands what my issue was). That is what I was about to do

> I read the instructions to line 17 and they do not mention adding the pension costs in with the contributions, but it appears TurboTax has taken the position that that is where they should be entered on the tax return.

Yes, that was what I read too. My concern about doing this was whether this would trigger some kind of audit, because of discrepancies between 1120s wages and W2/W3 reported. Seems like employer contributions (that would go in line 17) doesn't get reported on W2, so I should be fine. Thanks!

[Sam Hopi]

Hi . I have a problem with 8881 form. Could please help me how to file step by step 8881 on 1120-S?

what line 7 and 8 simply say on new draft of form 8881.

Also I do not know when I enter the cost without employer contribution software ask me enter the amount of contribution. And when I enter an amount hypothetically, the cost deducted from the contribution, let me know should I add the cost of set-up to contribution already!!!! And the cost of set up appears on k1 on box 13 with code P and 16 with code C as nondeductible expense

Thanks for your help.

[vikalp77]

Hi,

How does 8881 Part II credit works on individual return? Where Do I enter this information?

On K1 section screen, there was no place to enter this credit information.

I have $500 on Line 13 af of K1 attachement.

[RobertB4444]

The K1 attachment should assign a line number to everything that is on it.  If they have assigned line 13 to the credit then enter it on line 13 of the interface in order to get it through on your return.

@vikalp77 

[vikalp77]

I have it on line 13 of K1 and enter that on my personal return K1 information. But I don't see this credit applied to my personal return. Where should it show on 1040?

[PatriciaV]

The amount on Schedule K-1 Box 13 Code AF is carried over to Form 3800, Part I Line 1 and further described in Part III for Form 8881, Part II. You don't need to enter this credit anywhere else on your return. 

Note that this is a non-refundable credit, so you must have tax due on Form 1040 Line 16. You can follow the calculations for any allowable credit on Form 3800. If you have a credit allowed for the current year, it will appear on Schedule 3 (Form 1040) Line 6a.

@vikalp77