I need to file an amended return for 2018 to correctly show depreciation on a rental property first placed in service that year. (Property was inherited and I neglected to use step-up basis for depreciation.) My taxes paid for 2018 included withholding, estimated taxes, and the amount I paid when requesting a filing extension. When I filed my 2018 return in Oct 2019, TurboTax desktop said I still needed to pay about $300 more in taxes plus about $200 in penalties, which I did. In Dec 2019, I got a letter from the IRS saying I owed an additional $8, which I promptly paid. I preparing an amended return now with TurboTax, which says my depreciation correction will not give me a tax refund, which seems odd because that correction reduced rental income by almost $3000. Looking through the various forms and supporting pages for the amended return, I don't see the $300 of taxes I paid in Oct 2019 reflected anywhere. I can live with the $200 in penalties being non-refundable but I can't understand why a $3000 decrease in AGI produces no tax benefit.
March 3, 2021 7:56 PM last updated March 03, 2021 7:56 PM Connect with an expert
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1 Best answerUpdate: After several hours on the phone with customer service and using screen share to go through the problem with them, they acknowledged that the 2018 product is defective and can't correctly prepare the1040-X for an amended return. The solution is to go into Forms mode on the program and manually enter the correct values on form 1040-X.
March 5, 2021 8:29 AM Expert AlumniIt's hard to say for sure without being able to see your return or having more information. The most likely reason your amended return did not result in a refund after adding the depreciation would be due to the rental property showing a loss and your AGI being being above $150,000. The tax code allows up to $25,000 to be deducted as a real estate loss, as long as your adjusted gross income (AGI) is $100,000 or less. The deduction phases out between $100,000 and $150,000. If your income is greater than $150,000 there is no deduction. Instead, the loss is carried forward and can be used to offset other passive income or realized when the property is sold.
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Thanks, my AGI on both the original and the amended are slightly over $150k but I don't think that explains it. Here is some more info: My original Schedule E shows net income from the rental of about $3000 on lines 21, 24 & 26. The amended Schedule E shows a loss on line 21 and 0 on lines 24 & 26. These values are correctly reflected on Schedule 1 and on line 6 of the 1040. My line 7 AGI is about $3000 less on the amended 1040 than on the original. My line 15 total tax on the amended 1040 is about $500 less than on the original, which seems right given that my AGI dropped by about $3000. But here are two things I don't understand: First, my line 18 total payments on the amended 1040 is the same as on the original, although I paid $300+ in additional taxes and $200+ in penalties when I filed. Second, the 1040-X produced by TurboTax to be filed with my amended return shows all zeros in Column B (no net change) although it should be showing decreased in AGI, TI, and tax liability due to the corrected depreciation and zero-out of rental income, plus an increase in payments made because of the $300+ I paid when I filed. Column A is labeled as original amounts reported, but the the numbers TurboTax puts into that column all come from amended return rather than the original. Given the values shown on the 1040-X, it seems there is a software problem within TurboTax.
