Re: How do I accurately determine taxable income to apply 80% rule form 8995?

Lrachal

I am using ProConnect Tax to amend TY 2022 for a new client that has NOL (Sch C) carryforward from 2021.

Income includes W-2, 1099 R (non taxable) & Sch C (net loss).

Deductions: itemized

After entering everything, I am receiving the following critical diagnostic message: " NOL #1: The program doesn't automate the limitation of post-2017 net operating losses to 80% of taxable income, before taking into account any NOL deduction. You must override the amount of post-2017 NOL carryforward absorbed this year so it does not exceed the 80% of taxable income limit. If the net operating loss comes from an estate or trust Schedule K-1, enter the amount absorbed in that screen. US - Ref #53656".

In calculating the taxable income wages less current year business loss Sch C) less itemized deductions (Sch A). My dilemma is Sch A includes medical expenses that fluctuate based on income. How do I accurately determine taxable income to apply the 80% rule?

Wages 44,225

Sch C (10,260)

NOL carryforward 2021 $17,279

abctax55

Use the algebra you learned in high school?

But, since I barely remember those days:

I use a number I know will be close, adjust accordingly & check the math. I keep revising the number as necessary until there's no change.

It's a circular computation, similar to the SEHI one and the 'taxability' of a state refund.

HumanKind... Be Both

George4Tacks

Tax Tools is the Swiss Army Knife for tax professionals. Maybe this challenge is enough for you to buy it?

Here is a Screen shot of it's input screen

NO, I don't get a commission, I just really find it worth the investment as a real tool!

Answers are easy. Questions are hard!

abctax55

@George4Tacks

Cool.... I haven't purchased TaxTools in a while (I'll use my old version for certain things). I didn't realize they had added that NOL computation.

Maybe I should buy it again? I really enjoy working with the company; I buy tax return supplies from them annually.

HumanKind... Be Both

How do I accurately determine taxable income to apply 80% rule form 8995?

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