NOL and Taxable Social Security

[GolfCPA22]

Taxpayer receives social security benefits and has a farming loss for 2023 as well as a 2022 farming loss carryforward. My challenge is that Lacerte calculates taxable income before the NOL to be minimal with no taxable SS, however, when I enter the override to limit to 80%, then part of the social security becomes taxable and it becomes a vicious cycle that doesn't end with the same number twice.

Any guidance on how to calculate the NOL limitation when taxable social security has not been hit the limit of 50% or 85%?

[George4Tacks]

Generally bad things happen in Lacerte when you enter an override. What did you override. You use the phrase "taxable income" for net of farm loss and Social Security. Must be a lot of SS income. 

Get rid of the override and look at the worksheets Lacerte creates. My guess is Lacerte is doing it correctly.  

P.S. This is not support. This a forum supported by other users. You can call Lacerte and they can maybe help you figure this out. OR come back here with more information. We can not see your work.

[GolfCPA22]

I agree bad things happen with overrides, however, the NOL is from 2022 so it's limited to 80%, therefore, I am required to enter an override because Lacerte does not calculate the limitation. 

It's been hit and miss with the phone support, so I thought I'd reach out to the community first to see if some other professional has encountered a similar issue.

[BobKamman]

@George4Tacks "Must be a lot of SS income" -- or, more likely, there are Schedule B and W-2 income.  This is high school algebra, the formula is the same as what programs compute when there is an IRA deduction along with SS income.  Most of us have replaced high school algebra with more pleasant memories, so it is either "trial and error," or do a Google search for a formula that no doubt someone has already discovered.  

If the NOL carryover is $10k, why not just input $8K in the first place and find out how much SS is taxable with that amount?  Then figure out what, if anything, needs to be overridden from there.  

[DWayneB]

I have the same issue.  As much as we pay for Lacerte, you would think the system would perform the calculation.

[gs4]

The problem is when there is less than the maximum 85% taxable social security, then it does become circular.  I did just trial and error it to get it to the 80% NOL deduction which corresponds to the taxable amount of social security.  It took me 7-8 iterations, but if I were thinking more, probably 5-6 times would get it.  (Btw, Drake Software does the calculation.)

[SDennard]

I'm curious what you decided to do. I have the same issue. The taxable social security changes when I enter the amount of NOL that was calculated with "taxable income without regard to the NOL".

I decided to enter "O" NOL and let Lacerte calculate the taxable income (which calculated the taxable social security without the NOL deduction which would be the "taxable income without the NOL"). Then I manually calculated the 80% limit of NOL using that taxable income and entered it into the data. Then let it recalculate the return, which recalculated the taxable social security.  I couldn't find any IRS insight into this situation with SS and NOL in same return for clarification. I hope this is what was intended.

[Kappy]

@SDennard I do it the same way that you do it.

[GolfCPA22]

That's exactly what I did too! And since the 80% limitation isn't going away with the TCJA sunsets, I hope this is a priority on Lacerte's list to figure out.

[Kappy]

Lacerte seems to be leaving more and more calculations up to us each year.

You would think that such an expensive software package would be able to handle the necessary tax computations.

After the 2017 tax cuts, I called my Lacerte Rep and balked at the huge increase in the annual costs.

His response was "you have the Cadillac of tax software, and we needed to raise the fees in order to cover the research required for properly implementing the constantly changing tax laws."