Opportunity Zone Funds for Tax Year 2019

[rjs]

@vmann53  There are a lot of potential problems with that approach. First of all, as I said above, Form 8997 must be filed with a tax return that is filed by the filing deadline (including extensions). You might be able to add it with an amendment that is filed by the filing deadline, but getting the original return and the amendment both filed before the deadline would require careful timing, and it's not clear that this procedure would be acceptable.

The amendment would show either deferral of gain or recognition of previously deferred gain (or both) on Forms 8949 and 8997, but you have no way of integrating the changes with the TurboTax return. You would have to recalculate the entire return by hand, which would be difficult and error-prone. And since you then would not have a TurboTax file for the amended return, you would not be able to transfer information from the return to your return for the following year.

If you file your original return without deferring the gain, planning to amend later to defer it, you would have to pay the tax on the gain that you are planning to defer, then wait to get a refund after the amended return is processed. It takes the IRS 4 months or more to process an amended return.

On the whole, this seems like a bad idea. It would be much better to either find software that supports it, or go to a tax professional who has such software.

[bmk]

I spoke with a turbo tax specialist today who said that 2019 TT does support opportunity zone form in the highest level of the turbo tax package. Not entirely clear on which product that is, as she referenced repeatedly the highest level. The worksheet is now part of the program, she acknowledged that it had to be done offline for 2018. If you're able to get more clarification, that would be helpful. I went via the "speak live" option in the Contact Us section. After speaking with the standard product person, they had one of their CPAs call me back for the specific question. 

[mkneale]

What about this approach:

- create a new sale of stock, checking box F for long-term unreported gains

- box 1A: enter the EIN for the QOF

- box 1B: enter the date the QOF investment was made

- box 1D Proceeds: enter 0

- box 1E Basis: enter 0

- check the box for "the cost basis is incorrect"

- click through the next screen "none of these apply"

- check the button for "I know my cost basis and need to make an adjustment"

- enter the amount of gains you are deferring as a positive number into the cost basis field

I think, but am not sure, that this gets all the right fields filled out correctly in form 8949 (turbotax I think will show a negative adjustment to your cost basis in 8949 column (g).  One problem is there is still no way to indicate code "Z" in column (f). 

What do you think does this work?

[rjs]

@mkneale  Your approach will not work. It will not put code Z in column (f) on Form 8949, and it will not include the required Form 8997 in your tax return.

I repeat what I said above:

"Deferred gain for Qualified Opportunity Funds (Codes Y and Z on Form 8949) is in the list of Unsupported Calculations for 2019 TurboTax. It is not supported and is not going to be supported."

If you want to defer capital gain by investing in a Qualified Opportunity Fund, you cannot use TurboTax to file your tax return. There is no way to make it work.

[woodward-apart]

@rjs , why are you so negative about using Turbotax to do this? You can absolutely do overrides on form 8949 to make it work. (though yes you have to paper file). I explained it here

I agree thought that at this point I would prefer to use another product that properly supports code Z (does any?). It's embarrassing TT still hasn't added support.

[IggyL]

The form 8997 is already available from IRS, but the fact that TurboTax doesn't even allow you to add that form manually, so at least all of your forms would be within the same tax file, really makes me reconsider my 20+ years of relationship with TurboTax. :(

[mboz]

The only software I could find supporting 8997 in 2019 is TaxAct (though it's not yet available). Sadly they don't support MacOS.

To request a TurboTax refund (as they don't support OZs) the link is here. https://support.turbotax.intuit.com/forms/refund-request.jsp. I had 15+years as a TurboTax user, very disappointed to be going elsewhere. 

[Golfdiva]

I am requesting a refund.  Like many TT users, I have been using TT for 20+ Years. Very disappointed about level of support we get from TT regarding this topic. If TaxAct works, I am going to give it a try. 

I am generally disappointed with Intuit. I am a Quicken user for 20+ years too and they now want me to subscribe to the sofrware and pay an annual fee so I put my data in the cloud... time to switch. 

[AndyD]

I think the TurboTax support for the highest level of their software referenced in other posts may be Lacerte, which isn't really available to the average user (need an EFIN to use and file).

I came to the same conclusion to give TaxAct a try this year. However, the online version doesn't seem to support Opportunity Zone Funds. The download version is supposed to support this, but I'm hesitant to spend $100+ to try it. I've also tried to call TaxAct multiple times to get clarification, but the wait times are normally 1.5+ hours. I also sent an e-mail asking for clarification over a week ago, and no response. Not very reassuring, but might be the only way to file this year without getting a CPA. 

I also got an estimate from E&Y (I think they call it TaxChat).  The fee was $2,500, but included about 25 K-1s, so it might be cheaper for many. The only issue is they make you sign a disclosure that your information can be released to other E&Y entities around the world, specifically India. So basically they are offshoring the handling of these returns. Might be a good option to consider, but not 100% confident even they will know how to handle Opportunity Zone Fund investments.

Thanks to everyone who is sharing insight into this process, even though it seems like it would be very easy to make a few updates to calculations and forms for all tax software programs to support Opportunity Zone Fund investments.

[rjs]

@Golfdiva   We here in the Turbo Real Money Talk community cannot initiate refunds. Go to the following FAQ for instructions to get a refund under the TurboTax Satisfaction Guarantee.

Our TurboTax Satisfaction Guaranteed refund policy

[x147]

Mboz and all,

Tax Act 2019 premier download is available, even though their order screen says "coming soon".  Just proceed with the order or call them if you prefer.

So far, now using Tax Act and although I haven't tried e-filing yet, everything appears ok, clear directions on the 8949 - https://www.taxact.com/support/ and search for reporting and deferring capital gains for investing in a qualified opportunity fund.        And I can see they have 8997 in the program but haven't got to that section yet.  But again, I haven't tried e-filing yet because waiting on the K1, etc, so caveat emptor.

Still using TT  to check my work (minus the opportunity zone fund portion), so far both programs have correctly calculated to the penny.  To be fair to TT, it has much more brokerages/banks, etc imports, and in my opinion is most user friendly.  So prepare for much more typing (regular typing in data, not manual overrides) if going the TaxAct route.

[NW Jim]

I just finished using online TaxAct instead of TurboTax solely because of the opportunity zone filing issues.   The online version does properly complete the tax forms.    The software does not download nearly as many accounts. Nor is entering the sales of assets like stock quick.  But it does the opportunity forms 

copied below are the instructions. 

The IRS may allow you to defer paying tax on a stock sale if the gain is invested in a Qualified Opportunity Fund.

Whether the gain is reported to you on Schedule K-1 or Form 1099-B, follow these TaxAct entry steps:

1. Click Federal 
2. Click Investment Income to expand the section
3. Click Gain or loss on the sale of investments to expand the section
4. Click Capital gain or loss (Form 1099-B)
5. Add a new copy
6. Click Step-by-Step Guidance
7. Enter the description of the QOF investment (# of shares, % interest, etc.) as the description
8. Enter the EIN of the QO Fund as the description
9. Enter the date the investment was made to the QO Fund as the date acquired, click Continue
10. Choose Form 8949 category C for a short-term gain. Choose Category F for a long-term gain. 
11. Click Continue
12. Do not enter a cost basis or sales proceed
13. Click Continue.
14. On the screen titled Investment Sales – Adjustment Code(s)choose Code Z – Deferral of gain invested in a QO Fund
15. Enter the deferred gain that was invested as a negative number
16. Click Continue
17. Enter the EIN of the Qualified Opportunity Fund

[christec]

I just hung up from a Turbo Tax rep who said that you CAN NOT file with TT for opportunity zones....they do not offer form 8997 AT ALL.

[christec]

I just hung up from TT.  They say you can NOT file 8997 through them.  You must file paper....or get another program...

[AndyD]

I switched to TaxAct since they support the forms needed to file a return. TurboTax will also consider a refund if you purchased the software within 60-days: https://support.turbotax.intuit.com/forms/refund-request.jsp.