Rental loss on Schedule E may not be allowed in the tax return due to passive activity limitations and be reported as unallowed on Form 8582. In TaxSlayer Pro, when you create the return for the taxpayer the following year you are queried if you'd like to pull forward prior year information, and unallowed rental loss is among the bits of information that is pulled forward.
When creating the current year return, TaxSlayer Pro will inform you if unallowed losses are found in the prior year return: "Passive Activity Unallowed Losses were Found on Last Year's Return. Please Review Form 8582 from Last Year to Find the Amount of Unallowed Losses to Carry to 20xx." If you pulled forward prior year rental property information, the property's unallowed loss will automatically pull to the property's expense line "Other".
Diagnosing a prior year unallowed loss that didn't pull forward:
1. If you prepared the prior year return in TaxSlayer Pro, when starting the current year's return you are prompted to pull forward information from the prior year. Irrespective of whether you answered Yes or No to pulling in information you still need to manually pull in the rental properties in the tax return here:
- Income
- Rents, Royalties, Entities (Sch E,K-1,4835,8582)
- Rents and Royalties
- Pull button - select the property(ies) to pull
After pulling in the property the prior year loss will be automatically entered as an expense under the "Other" category.
2. Did you change PCs? In an office with a single PC preparing tax returns, perhaps the prior year return didn't get migrated to the new PC. In an office with multiple networked PCs using TaxSlayer Pro, if the PC functioning as the File Server changed perhaps the prior year return didn't get migrated to the new File Server PC.
3. In an office with multiple networked PCs using TaxSlayer Pro, if you're working on a Workstation PC and the prior year rental information isn't available to be pulled in, exit the return, reopen it on the File Server PC and see if the rental information is available to be pulled in. If it is, ask our support staff to create a tech support ticket to diagnose why the Workstation isn't communicating with the File Server, as TaxSlayer Pro on this Workstation is presumably experiencing other problems.
4. Do you have the prior year return open at the same time as the current year return is open? Unusual problems can occur when both current and prior year returns are open, especially if both are being prepared at the same time in sequence. It's best to finish and exit the prior year return (whether or not it's marked Complete) before starting the current year return.
