When I first entered my inherited rental property into Turbotax while doing taxes for 2017, somehow in answering the questions I evidently caused Turbotax to create two properties at the same address, but with two different in-service dates, one the date I inherited the property in Dec 2016, and the other the date I actually chose to put it in service, Jan 2017. Turbotax created two “Asset Entry Worksheets,” one for the real property and one for the nonexistent other property at the same address. It also figured the building/land cost differently for the “two properties,” one using property tax figures that I imputed, and one using the Turbotax default (I’m guessing). I didn’t realize this happened because the only indication on the main tax forms was a approximate doubling of the depreciation on my 1040 Schedule E, and a entry on line 17 of Form 4562 showing a “MACRS deductions for assets placed in service in tax years beginning before 2017.” I was new at the rental property business and the depreciation number listed on the 1040 schedule E looked correct to me (I was forgetting you only depreciate the building and not the land). Turbotax then carried this depreciation forward every year, and only this year while correcting another mistake did I realize the depreciation number couldn’t be right given I can only depreciate the rental property building. So…how do I correct this, both in Turbotax and for the IRS? From my research it doesn’t look like I can correct Turbotax using the online program. Is that right? I have to get the downloaded program to have access to these forms and change them so that 2022 is correct? And for the IRS, do I correct the mistake with Form 3115, Application for Change in Accounting Method, or just by amending my returns starting in 2017. What a mess!
