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March 3, 2023
Question

Tax change due to deleted prior year self-employment income and expenses

  • March 3, 2023
  • 1 reply
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My question relates to the self-employment section of Turbo Tax. In the years 2020 and 2021 I had a company that was run as a sole proprietorship. In 2022 this company transitioned to an S-corp. Here’s the short of it:

 

2020 - 2021: The company filed as sole prop on our Schedule C. The 2020 tax year had a tax loss on the Schedule C of under $500. The 2021 tax year had a small gain.

 

2022: First year filing as s-corp after converting last Aug. On the corporate level, the 1120s and the K-1 included on our return. The K-1 shows a gain. 

 

Here’s the issue. After adding the K-1 in Turbo Tax to our return I removed the self-employment/schedule C section for 2022 since it was all on the K-1 now. When I did that it caused my taxes due (fed and state) to jump up by over $2k combined. Prior to deleting this section I had entered zero new 2022 self employment info. The only numbers showing inside of Turbo Tax on the main income screen were in the 2021 column. So I am very stumped as to what caused the jump. The only thing I can think of is it was carrying something over from 2020 or 2021, but I have no idea what that would be given the gain/loss from each of those years.

 

Any help in tracking down what caused this is greatly appreciated.

1 reply

March 6, 2023

If you had any assets that you were depreciating then removing the schedule C would have removed any depreciation deduction that you had.  Since those assets and that depreciation should be on your 1120-S now this shouldn't change your bottom line at all.

 

@smsdiego 

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smsdiegoAuthor
March 6, 2023

Thanks a bunch, @RobertB4444. Is there a way to see what items were being depreciated on my 2021 return or somewhere within TurboTax?

March 6, 2023

Yes.  Log in to your TurboTax account and look at the prior year returns.  You'll be able to look at all of 2021 and see what you were depreciating.

 

@smsdiego 

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