1040-US: Which attributes are automatically reduced in Screen 982?

Alerts and notices

Question

Does the tax application automatically reduce tax attributes?

Answer

The tax attributes display, calculated as of the last printing or previewing of the return, available for reduction if X is entered in the Display available credits and carryovers field in Screen 982. While all available attributes will display, only some will be reduced automatically.

The following tax attributes will be automatically reduced by data entry in Screen 982.

  • Net operating loss attributes - The net operating loss attributes and the AMT net operating loss attributes will be reduced on the Net Operating Loss Worksheet 4 - Carryover Calculation. A statement will print showing the NOL carryover before reduction, less the amount reduced by Form 982.

    Reduction of the net operating loss or carryover to the current year is done after taking into account any amount used to reduce the current year taxable income. Form 982 reduces remaining current year NOL attributes after the tax liability for the current year has been calculated, then reduces remaining prior year NOL.

  • General business credit attributes - The general business credit attributes will be reduced on the Business Credit Carryover Report. Review all pages if there is more than one Business Carryover Report.
  • Minimum tax credit attributes - The minimum tax credit attributes will be reduced on Form 8801, Page 2, line 26. A worksheet will be provided on the bottom of the form to show how the carryover was reduced.
  • Capital loss attributes - The capital loss attributes for regular tax and AMT will be reduced on the Capital Loss Carryover Worksheet, located in the CO folder. Both worksheets will reduce the short-term attributes on line 8 and the long-term attributes on line 13. The tax application provides how the carryovers were reduced either on the worksheet or in a not-required statement.

The following tax attributes will need to be manually reduced.

  • Passive activity loss attributes - To reduce the passive activities, override the reduced amount in the Suspended Losses to Next Year column of the applicable activity's Passive Activity Deduction Worksheet, located in the 8582 Wrk folder. Amounts entered directly on this form will proforma to next year.
  • Passive activity credit carryovers - To reduce the passive activity credit carryovers by the amount excluded from income, override the Suspended Credits to Next Year column of the applicable Passive Activity Credit Worksheet, located in the 8582 Wrk folder. Amounts entered directly on this form will proforma to next year.
  • Foreign tax credit carryover - To reduce foreign tax credit carryovers, override the amount(s) proforma'd to the following tax year's Screen 1116CO.

Note: A client note can be created in the current tax year and proforma'd to the following tax year as a reminder to adjust the foreign tax credit carryover in the following tax year. For more information about client notes, see Attaching a client note.