BUG? - PA-40 Schedule E rental loss - TurboTax vs PA MyPATH

Forum|Forum|3 years ago
January 28, 2023
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2022 TurboTax Premier bug?

I live and work in Maryland, but have rental properties in Pennsylvania with a net loss this year. Turbo tax appears to ignore the loss on 1 property and indicates I need to pay tax on the income from another property... but I have a net loss for all rental properties in PA. When I submitted the same information via the PA Department of Revenue site (PA MyPATH), Pennsylvania recognizes the rental property income loss collectively... and indicates I do not owe taxes ... conflicting with TurboTax which indicates I owe taxes due to the 1 property with positive income (ignoring the loss for all properties in PA). I have validated that the PA-40 Schedule E inside of TurboTax does not recognize the loss (line 20) for the property with a true loss for this year.

How do I report this bug to TurboTax?

Thanks!

Best answer by RobertB4444

Thanks, Patti! I agree that the loss does not reduce my income. However, as I need to file taxes in Maryland and Pennsylvania... who do I pay the tax to? If I use TurboTax's methodology, it indicates I need to pay $55.00 to Pennsylvania (and $55 less to Maryland). However, if I "correctly" (manually) fill out the PA-40 Schedule E according to the form directions, then I do not owe $55.00 in PA taxes (instead of paying the $55 to Maryland) - consistent with the Pennsylvania Department of Revenue online filing with PA MyPath which indicates I do not owe any state tax to Pennsylvania due to the loss.

My question at hand... which state do I owe $55 tax to related to the rental property loss?

Thanks again for your insight!

You are correct that you should adjust the PA-40 to show the total loss in Pennsylvania. You shouldn't have to pay the $55 to PA.

@carey123456

PattiF

Please send a diagnostic copy of your tax return so that we can help with the problem that you are having with the loss on your rental properties. I would like to take a deeper look at this.

TurboTax Online:

Sign into your online account.
Locate the Tax Tools on the left-hand side of the screen.
A drop-down will appear. Select Tools
On the pop-up screen, click on “Share my file with agent.”
This will generate a message that a diagnostic file gets sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

Open your return.
Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent”
This will generate a message that a diagnostic copy will be created. Click on OK and the tax file will be sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

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carey123456Author

Thanks for the reply! The token number is 1057958.

PattiF

Your tax return is correct. Your joint income of over $150,000 doesn't allow for any loss from the rentals to be used to reduce your income at this time. The loss was used to reduce the rental income to $0.

You have a passive loss carryover that is created when you have more expenses than income (a loss) from passive activities that could not be used this year. Instead, the passive loss is carried forward to future tax years to offset any passive income. The loss continues to be carried over until you use up the entire amount.

Passive Loss Carryovers can be created by any passive activity. Most come from rental properties (Schedule E). The Passive Loss Carryovers is on Schedule E Wks - Carryforward to 2023 Smart Worksheet (final page - note this is a TurboTax supplemental schedule and not an IRS form). You can see that in Forms View

If you had more than one property, or you didn't use TurboTax last year, Passive Loss Carryover appears on Form 8582 Page 2 Section VIII Allowed Losses.

The loss will be carried forward until you are able to use it on your tax return. This can occur if your income drops below $150,000 for Married Filing Jointly. All of the unallowed (suspended) losses will be used when you sell the property.

Please see IRS Publication 925 for more information.

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