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Generating Form 4255 to Recapture ITC in ProConnect Tax

SOLVEDby IntuitUpdated June 06, 2023

To generate the 4225 from the Disposition Screen:

For both 1040 and 1120 returns:

  1. Go to Input Return Income Dispositions Schedule D/4797etc
  2. In the Quick Entry grid, enter:
    • Description of Property
    • Date acquired
    • Date sold
    • Any other applicable information such as Cost or Basis, Sales Price, etc.
  3. Select the Details button.
  4. Select the 4684, 6781, 8824, tab.
  5. Scroll down to the ITC Recapture (4255) section.
  6. Enter the Original cost or basis from Form 3468.
  7. Enter the Original credit from Form 3468.
  8. Enter any other applicable information for this disposition.

To generate the 4225 from the Depreciation Screen:

For both 1040 and 1120 returns:

  1. Go to Input Return Deductions Depreciation
  2. Select the Details button.
  3. In the Basis reduction (amortizable costs expensed, ITC, etc) field enter the amount of ITC.
  4. Select the Dispositions tab.
  5. Enter the Date sold or disposed of and the Sales price.
  6. Scroll down to the ITC Recapture (4255) section.
  7. Check the Recaptured ITC checkbox.
  8. If the original credit amount is different from the input in the Basis reduction input, enter the amount in Original credit (if diff. from ITC basis reduction)

To override the amount on line 20 of the 4255:

For 1040 returns;

  1. Go to Input Return Taxes Other Taxes
  2. Select Schedule J, Recapture, Other Taxes
  3. Scroll down to the Recapture Taxes section.
  4. Enter an amount in Form 4255 [Override]
    • An amount entered here will flow to Schedule 2 line 17a on page 2, but it will also suppress the 4255 in the return.
    • Using this override will generate this diagnostic: Form 4255, Recapture of Investment Credit, override is not allowed for e-file returns. This override will require you to paper file this return. 

For 1120 returns:

  1. Go to Input Return Taxes Additional Taxes
  2. Select Additional Taxes
  3. Scroll down to the Recapture of ITC section.
  4. Enter an amount in Form 4255 [Override]
    • The amount entered in that input will suppress the 4255 in the return, and the amount will flow to page 3 of the 1120 on line 9a of the Schedule J 
    • Using this override will generate this diagnostic: Form 4255 must be attached to the return to qualify for electronic filing. Please remove the override or file this return as a conventional paper return. 

For 1041 returns:

  1. Go to Input Return Taxes Other Taxes
  2. Select Other Taxes
  3. Scroll down to the Recapture Taxes section.
  4. Enter an amount in Form of investment credit 4255
    • The amount entered in that input will flow to page 2 of the Form 1041 on line 6 of the Schedule G, and check the box for Form 4255.
    • If an amount flows to this line of the return, a critical diagnostic generates: The return has an amount on Schedule G, Recapture taxes. If Schedule G, Recapture taxes has an amount, the IRS requires Form 4255 or 8611 to be included in e-file. ProConnect does not currently support Form 4255 or 8611. This return must be filed as a conventional paper return. 

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