Question

Form 7203 conflicting information

Forum|Forum|4 years ago
March 27, 2022
3 replies
0 views

I've followed the IRS instructions for filling out this form. In the case of my S-Corp we have a negative loss with the business. Based on my understanding of the instruction, Part 1 should only be showing a gain in Part 1 which in my case would be 0 which is supposedly allowed. In Part III I would enter my loss as a positve number since it's under the Deduction section. I've done this and run the error check. The error states that I cannot have a gain in Part 1 and a loss in Part III even though my basis is higher than the loss. What am I not understanding with this form.

S-Corp

R

Rlc54326666

I am having the same problem with this form. I also keep getting an error message about Line 1. It says" Total stock basis at the beginning of the year." However, the error message I get says "Number of days you required services should not be less than zero."!!!!! Seriously??!!

Rick19744

Employee

I can provide some conceptual input on this, but not sure if this form needs to be manually completed or if TT pulls the information from the K-1. My thought is it is manually completed.

Keep in mind that this form is brand new and was not released until the end of 2021. First year forms always seem to be problematic.
In the past, S corp shareholders were required to maintain their own stock basis and debt basis schedules. This form is an attempt by the IRS to provide some consistency to the basis tracking.
Line 1 should be reflecting your beginning of the year stock basis. This should come from however you were tracking this in the past. So whatever that figure was at the end of 2020, that figure goes on line 1. This also cannot be less than zero. If zero, input zero.
Part I will be completed with only positive income and gain items.
Part III will be completed with only loss or deduction type items.
Part III line 47 column c will then go on Part I line 11. As noted previously, this most likely will need to be manually input.
I believe your problem is that you have not entered the beginning of the year stock basis on line 1.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

J

Jim50Author

The form requires manual input. Actually I did enter 0 on line 1 even though the K-1 is a negative number and put in the debts under Part III as a positive number, but I still get the error message that they don't agree even though they are both 0. Perhaps I should show the income for the year under Part II but that appeared to only be for loans.

Rick19744

Employee

Follow up responses:

Zero on line 1 and the K-1 being negative are mutually exclusive. One has nothing to do with the other.
Line 1 is your stock basis at the beginning of the year. Nothing else.
Debts don't go in Part III. This is for loss items or deductions. Maybe you just used the wrong word in describing what you are entering in Part III.
Do not enter any income in Part II. That is not where it should go.
What line items do you have reflecting income or gain in Part I?
In general terms, explain the following:
- What was your beginning of the year stock basis?
- What was the total of your positive items; income, gain, etc?
- What was the total of your loss items or deductions?
I am going to tag @Anonymous_ to see if he is aware of any issues with this form

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

B

bamaisone

My problem is with line 3a of section 1. I have a value of -3,267 on my K-1 (1020-S). Instruction says only enter positive numbers in section l, so I enter 0 and it still highlights that line as being in error. What am I missing. I am entering the negative value, 3,267 in section lll.

M

mlohrer

I presume -3267 is your ordinary business loss for the year.

Section I of 7203 deals only with ADDITIONS to basis, which would be business income (NOT loss), so enter NOTHING in section I, remove even the entry "0" by deleting it from the 7203 (easy in forms mode, not sure how in interview mode, I don't use that mode), not sure if that is causing an issue as "0" is not a valid "business income" addition to basis.

Section III deals only with LOSSES you are trying to determine the allowability of. Line 35 Column A is a LOSS entry, so enter POSITIVE 3267, as the form PRESUMES that entry to be a LOSS - seems like you understand that.

The above process is how I have completed 7203's with no errors flagged...