Section 179 ersus SDA issue

[RichardSC]

I had an equipment purchase last year for my small engineering business S Corp. I ran a loss last year so the 179 was disallowed with a carryover to 2022. However, in Turbotax the 1120S program entered it as a SDA at 100%. I thought nothing of it. My ignorance.

This year, Turbotax is trying to use the carry over. I know how to defeat that but just asking: The SDA does not show up as depreciation on the 4652. How do I handle this?The fact that things require my override are a flag and lead to my questions.

[Anonymous_ · Accepted solution]

Are you certain that you took the SDA (bonus depreciation)?

If so, the deduction would have appeared on your 1120-S (increasing the 2021 loss) and also on Line 1 of your K-1 (1120-S). The Section 179 figure that was disallowed is what would have been carried forward.

[Mike9241]

look again at the 2021 return, especially Form 4562. 179 is only allowed to the extent you had income before this deduction. any portion that produces or increases the loss becomes a carryover.  179 is a separately stated item on the k-1. was there an amount on your k-1 in box 11?  the SDA is not so limited, it can produce or increase a net loss it is included in line 14 on page 1 of the 1120-S. .  

[RichardSC]

Yes, on the 2021 return K1 Line 11 shows zero. As I was showing a loss, it did not allow the 179 expense.

Yes, on the 2021 return Line 14 on page 1 and Line 14 on the 4562 show the full depreciation.

As I pre-enter data for 2022 return it is trying to give me the 179 expense deduction. Also on the depreciation report, it shows zero deduction for the piece of equipment and Turbotax advises not to change it for an SDA.

Suggestion? Thanks for responding.

[RichardSC]

Yes, it increased my 2021 loss which passed through to me. The full amount was applied under SDA. All of the Section 179 was disallowed (correctly). As I said, in 2022 preliminary, Turbotax is not trying to apply the Section 179 as carryover even though the full deduction was taken under SDA. It requires some manual cleaning up inside Turbotax. Thanks.

[Anonymous_ · Accepted solution]

Yes, it sounds like the asset might have been entered more than once or the program threw an error of some sort. 

If you have an entry on Line 14 of your 4562, you should not also have a Section 179 carry forward for the same asset.

[RichardSC]

Thanks! Yes, that is my confusion - I understand that it cant be depreciated as an SDA and then show up as a 179 carryover the next. No, the asset only appears once in depreciation report. The depreciation report for 2022 shows zero depreciation. This appears to be an error in the software and it will take many overrides to fix. Suggestion or guidance welcome.

[Anonymous_]

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@RichardSC wrote:

This appears to be an error in the software and it will take many overrides to fix.

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If that is the case then you might be better off starting this year's return from scratch (you do not want to transfer in erroneous information).

You can always try contacting Support.

What is the TurboTax phone number? (intuit.com)

[RichardSC]

Yes, barring my doing something to defeat the software,  it does seem like an error. I also agree that after trying to clean up the error, it is not trivial or I at least need some guidance. A clean install is one approach but I will lose a lot of history. I will contact support.