Schedule E: S-Corp Prior Year Unallowed Losses

[RichA2023]

I have a K-1 showing a profit for 2022. I had a carryover loss from 2021. TurboTax allows me to complete Form 7203 to calculate my allowable carryover loss to apply to 2022. However, when I get finished with Form 7203, the summary shows my Allowed Loss and the "K-1 Amount to Adjust" as the original K-1 value for 2022. It instructs me to manually adjust the K-1 value. If I subtract the carryover loss from the original K-1 value and enter that, I end up with the correct amount on Schedule 1 lines 5 and 10 as well as 1040 line 8. However, Schedule E is not correct per the IRS instructions. Schedule E line 27 correctly has the prior year loss box checked, but there is only a single line listed the non-passive income which is the K-1 amount - the carrover amount. Per the IRS instructions, there should be one line with the actual K-1 amount for the current year and a second line with the carryover amount with PYA in column a. The resulting total is the same, but it says "Caution: The IRS compares amounts reported on your tax return with amounts shown on Schedule(s) K-1". That concerns me. This seems like a bug. I think I could manually adjust that form in the download version, but I'm using the online version. Is there a fix for this in the online version or is there a way to "upgrade" to the downlaod version?

[RobertB4444 · Accepted solution]

You can switch from the online version to the desktop version.  Here are the instructions on how to do that.

@RichA2023 

[RichA2023]

Thanks for the info. It appears that's just a way to transfer data from one to the other but requires purchasing the download version after already having purchased the online version. I guess I maybe messed up by paying for the online version before I knew I had everything completed correctly.

Fortunately, I figured out a workaround to my problem. I was able to enter a second K-1 named PYA (with the same EIN) which had the carryforward loss as its amount. That gave me the same net result but with the two separate lines on Schedule E as required. I'm a bit disappointed with TurboTax. That should have already been a provision in the software or there should have been clear instructions to that work around. I have to think that's a fairly common occurrence to have a carryforward S-Corp loss.

Anyway, thanks for the help!

[yooperg]

I have the desktop version and the exact same situation. The desktop shows the same behavior as RichA2023 described, eg after using 7203 to determine allowable losses, TT wants me to adjust the K-1, and then only has one line on schedule E instead of two - one showing current year and one showing a PYA line for the loss carryover.  This is new this year (with form 7203). TT 2021 and prior did this correctly with a PYA line on Schedule E for prior years loss carryover.  Please fix this!!

[PatriciaV]

Are you able to scroll down in the Line 28 section of Schedule E, p2, to see more lines after the first four that first display? In most cases, each S-Corp with Prior Year Adjustments will display a second PYA line after the one with the S-Corp name. But sometimes you need to scroll down to see it. Look for a gray scroll bar within the form itself, on the far right margin of the Line 28 boxes.

@yooperg 

[RichA2023]

I can't speak for yooper920, but that's not possible in the online version since you aren't able to directly access forms. What you suggest is what I was hoping for if I was able to switch versions, but that didn't seem to be possible without paying for the software a second time. Fortunately, I was able to find a workaround and end up with the equivalent on my Schedule E.

[Jack05]

The carry forward loss does not reflect on the Schedule E, Pg 2. I looked and scrolled down as suggested. It is not there.

This is going to screw up a lot of people's taxes!!!!

[yooperg]

How do I turn this into TT as a problem? Do some of those who have "Expert" by their name have a way to do this? 

My k-1 has Box 1 income and loan repayment box 16 Code E. In the My Other situations page has 2 boxes checked

I did not check the box, I have at-risk loss carryover from 2021, since my carryovers are due to basis not at-risk.

When I continue f7203 comes up.

I have no beginning basis so TT correctly figured my basis due to current year profit of $1000. In the Debt basis section had $2000 debt at beginning $500 was paid so $1500 at end. In Part III of -Allowable Losses, there was $5000 carry over and TT correctly calculated the allowed amount of $2500 = $1000 basis + $1500 debt, and carryover of $2500.

GREAT - SO FAR. when click continue it asks what I should adjust my K-1 by Huh??

If I don't adjust anything, the Schedule E pg 2, doesn't show the PYA -prior year loss

And if I adjust to $(2500) Schedule E shows the loss in the current year but no line for the profit.

In ether case TT does not put a line for the prior year losses - PYA like it should. 

My work around was what was suggested by RichA2023. I made 2 companies, one showing the profit and the other named PYA, same EIN, but showed the loss and the loan payback.

This is a new bug this year. It worked fine in prior years.

Also, while I was messing around with this, I found that if I didn't have a loan repayment involved, just a prior year loss, form 7203 would not even get triggered.