TT sometimes shows a passive loss from 2022 as "Before 2018"

[PerpetuallyConfused]

In 2022, an LP I invested in reported a loss of $18,000 on its K-1. My 2022 Form 8582 shows this as unallowed, and the CPA who did my taxes listed it as a carryover for 2023. For 2023, I'm using TT for the first time, and during the "I have passive activity losses carried over from last year" part of the K-1 interview for this LP, I entered the $18,000 carryover.

On pages 3 and 4 of the K-1 TT generates for my return, the $18,000 is shown in column (b), "Suspended Loss Carryover From Prior Year." This is correct: the carryover is from 2022, which is the prior year. However, on page 8 of the same form, the $18,000 is listed as a loss Before 2018. This is not correct: the loss is not from before 2018. The same mistake shows up on page 20 of the Sch K-1 Wks-Partnerships (...) -- Smart Worksheet: the $18,000 loss is listed as Before 2018.

How can I get TT to properly categorize this loss as from 2022 instead of as from before 2018? 

I can post screen shots, if that would be helpful.

Thanks.

[tagteam]

I will page Champ @Mike9241 for your issue. Please check back later.

[PerpetuallyConfused]

As a followup to my own post, would it be reasonable for me to go into Forms Mode and manually move the entries on the K-1 and the K-1 Worksheet to the right places (i.e., to the lines for 2022 instead of for Before 2018)?  If I did this, would TT retain and propagate this information in future tax years?

[Mike9241 · Accepted solution]

this seems to be a bug in Turbotax programming. From what I can tell that 2018 loss is only for QBI/199A  loss carryforward purposes not passive loss carryforward purposes.  I'm using a desktop version of Turbotax and in interview mode I could enter the 2022 PAL which came out correctly but there was no way to enter the QBI loss as 2022 so Turbotax plugged it into 2018. Under the tax laws the year of the passive loss doesn't really matter since they're aggregated by activity and then the activities are aggregated when determining what might be allowed (FORM 8582). However, under the tax laws QBI losses must be used on a FIFO basis.  in answer to your question, yes you can go into forms mode and fix the error.  From using TT for many years once corrected TT should c/f the loss using the correct year but can't guarantee it since I don't do the programming.   

[PerpetuallyConfused]

My CPA separated PAL carryovers from QBI loss carryovers, and the $18,000 in question is a PAL. I'm using the desktop edition of TT Home and Business.  From what you wrote, it sounds like I should be able to get the correct result in interview mode. Since this is my first year with TT, I'm probably doing something wrong.

The $18,000 loss was reported in Box 1 of Part III of the K-1 I got from the LP last year.  On my CPA's list of carryovers, the Disallowing Form is shown to be 8582, and the Originating Form is Sch E P2. Does this give you enough information to help me enter the $18,000 PAL in interview mode so that TT correctly attributes it to 2022?

Thanks.

[Mike9241]

ok so TT is showing the 2022 PAL as a 2018 PAL . it doesn't matter becuase PALs are aggregated but to correct te issue go into forms mode. go to the K-1 and scroll sown to the section that shows the PAL by year delete the amount for 2018 and enter as a negative for 2022 or in interview mode go back to the business income section. on the line for k-1 schedules click on update. select partnerships and click on update.

when you get to the k-1 click on edit.

click on continue until you come to the page that asks to "check boxes that have an amount or are checked on the form". you must check box 20 for QBI and any other info. without this checkmark due to a programming bug, you won't be able to enter the PAL as belonging to 2022.

click continue.  enter box 20 info like 20Z. clcik continue. on the next page (Describe the partnership) that asks if you have a passive loss carryover from last year. check the box and then continue.

the next pages asks for PAL carryover (total for all years) . continue. the bext page asks about other carryovers. click continue if none.

the next page asks about the PAL c/o for AMT purposes enter the amount for all years. continue

the next page asks about other carryovers for amy purpose click continue if none

the next page asks about the QBI carryover all years. if necessary, enter the amount as a negative. continue

the next page should ask "enter info about passive losses" delete the amount for 2018 and enter as a negative for 2022 in the top section that asks about regular tax. evidently TT wants an amount for all years  so enter 0 for years before 2022

in the bottom section correct the QBI c/o if needed. continue

you'll come to a page that asks about QBI for the current year. enter the 20Z loss amount as a negative  from the k-1 on the same line as the loss in part III of the k-1

notice that for the 8582 there is no year specified for the PAL c/f from 2022 

by the way PALs (IRC 469) and QBI loss carryovers (IRC 199A) are completely different. once entered correctly in TT, it should handle them properly in future year.  the big question is what happens to QBI loss c/o after 2025. QBI is in effect for 2018-2025 unless congress extends the law it dies. what happens to QBI c/o's at that point is unknown

[PerpetuallyConfused]

Thank you for this extremely detailed and helpful reply!