hen completing the partnership tax return (Form 1065) in TaxSlayer Pro, the return will be blocked from electronic filing if there is a loss on Schedule K line 1 and a Section 179 deduction on Schedule K line 12. Attempting to mark it for electronic filing, you'll see this message:
Cannot e-file with a loss on Schedule K and a Section 179 Expense Deduction.
Generally, this e-file block indicates the business income limitation is incorrect on Form 4562.
The total Section 179 expense that the partnership can deduct is limited to its taxable income from the active conduct of a trade or business during the year. This e-file block indicates too much is being deducted.
To correct Form 4562 and remove the e-file block, from the Main Menu of the partnership return (Form 1065) select:
- Deductions
- Depreciation (Form 4562)
- Form 4562
- Section 179
- Taxable Income Limitation Adjustment - Enter as a negative number the amount of the taxable income limitation for the year. You should see the calculated limitation above the entry field.
After making the adjustment, Form 4562 line 11 Business income limitation should be $0. The Section 179 deduction will no longer be passed through to the shareholder(s) on Schedule K but will instead show on Form 4562 line 13s as a carryover to next year.
Additional Information:
IRS: Instructions for Form 4562, Depreciation and Amortization
TaxSlayer Pro strives to make the information on this page timely and accurate but makes no promise or guarantee about the timeliness, accuracy, or completeness of the contents of this page. This is general information and is not intended to be tax advice. You are encouraged to also review the underlying federal resources and publications.