Entering Passive Activity Loss carryover for California Form 3801

Forum|Forum|4 years ago
March 25, 2022
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I am attempting to amend my 2020 California tax return. I am using Turbo Tax Deluxe. I cannot figure out how to enter prior year passive activity loss for California. This prior year activity loss was not included when I entered prior year activity loss into the Federal portion of Turbo Tax for Schedule E. This prior activity loss amount is reported on California Form 3801. I have opened California Form 3801 using the "forms" option, but I cannot manually edit the form. I can find no way to enter this passive activity loss for California using the "step by step" method. Any help on how I can add this passive activity loss to my California state return will be greatly appreciated. Thank you.

PatriciaV

Employee

Please clarify if you entered a Federal prior year passive loss for this activity that appears on Schedule E.

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SCE1Author

Patricia,

Yes, I did enter on the Federal Schedule E for passive activity loss carryover identified for Federal. My original problem was I could not figure out how to enter additional passive activity loss carryover only for my California return.

Since I submitted my question multiple hours ago, I stumbled across how to enter the passive activity loss carryover for my California return. I was able to successfully add the additional California passive activity loss to my California return, when I stumbled across the "step by step" screen that asked "Any Section 179, Passive or At-Risk Loss Carryovers?" embedded in the "Rental and Royalty Summary" section. After updating this screen, I checked California Form 3801 using the "forms" feature on Turbo Tax and I was able to verify that the passive activity loss carryover did indeed show up on the form. So I think I am OK. I found the solution on my own.

However, I do now have another question. While reviewing our 2020 California return in preparation for the addendum we are working on, we noticed that almost all of my tax exempt interest that was imported from our Vanguard accounts was taxed on my California return. The majority of this tax exempt income comes from California Municipal Bonds, so it should mostly be both tax exempt for both state and federal. How do I go back and change the characterization on for this imported interest to reflect that it is mostly California tax exempt? Is there a way to precisely indicate how much is California tax free interest and how much is only Federal tax free interest?

Thank you.

PatriciaV

Employee

Yes, entering your carryovers under the Rental Property section should transfer that info to your State return.

You may need to adjust your California income for the portion that is tax-exempt. Return to the State section of TurboTax and go through the interview again. Look for a page asking about California adjustments that has a place for tax-exempt interest. Enter the amount of bond interest that should not be taxed in California.

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hqueue

One related question to California Form 3801 I've been struggling to figure out:

- Part I - 1b: clearly this is meant to reflect the current tax year (2022) net loss amount

- Part I - 1c: this wasn't clear to me whether this should reflect ONLY the prior net loss amount from the immediate tax year before (2021) or if this should reflect the total carrying balance for all historical passive losses from ALL previous years (like in Federal Schedule E)

If this Part I - 1c is meant to reflect the total carrying balance for all historical passive losses from all prior years - does anyone know how to update this in TT? The TT software filled in only the immediate tax year before (2021) figure in Part I - 1c.

Thanks!