S Corp Expired Net Operating Loss Error

Forum|Forum|1 year ago
July 29, 2024
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I am completing my S Corp 2022 taxes using TurboTax Business 2022 desktop version.

I have a NOL for 2021 in the amount of $5,840. My state is California, when I run the review while in the "State Taxes" section to check for errors it keeps giving me: Expired Net Operating Loss error "You have a prior year NOL listed on your form 3805Q, Part II, Line 2. Please review form 3805Q and remove any prior year Net operating losses that have expired."

I read in the user forums that NOL's can be carried forward 20 years.

Why am I getting this error?

What should I do to fix the error message?

Should I just ignore the error?

Please help!

TurboTax Business Windows

M-MTax

An S corporation cannot deduct an NOL; instead, the shareholders must include their respective shares of the S corporation’s NOL in their own computations of individual taxable income. This amount can contribute to an individual NOL for the tax year.

Fund247Author

I am the sole owner of the S Corp. I had NOL in 2021 which was reflected on my K-1.

Why is TurboTax giving me this error while doing the California error check? It's my understanding NOL's can be carry forwarded 20 years. Since I have a NOL, my income is definitely less that $1 million, so the suspension should not apply to me S Corp.

I also read that California suspended the NOL carryover for 2020 and 2021:

Suspension of NOL carryover deduction

For taxable years 2020 and 2021, California suspended the NOL carryover deduction. Both corporations and individual taxpayers may continue to compute and carryover an NOL during the suspension period. Different rules apply depending on the amount of income per year.

For the 2022 taxable year, the net operating loss suspension has been repealed.

The suspension does not apply:

For individual taxpayers, if they have net business income or modified adjusted gross income of less than $1 million.

For corporate taxpayers, if their income subject to California taxation is less than $1 million.

NOL deductions disallowed during this time period will be extended for each year they are suspended.

Questions:

How do I fix this error?

Should I just ignore the error?