Generating Schedule J in Lacerte

What's new for tax year 2024:

• The IRS has updated terminology that impacts some forms and schedules. Fishermen has changed to Fishers or Fishing Income. The instructions below contain the updated terminology, prior tax years would use Fishermen instead of Fishers or Fishing Income.

Below, you'll find information about generating Schedule J, Income Averaging For Farmers and Fishermen, in Lacerte.

Use Schedule J (Form 1040) to elect to figure the current year's income tax by averaging, over the previous 3 years (base years), all or part of this year's taxable income from farming or fishing. This may give a lower tax if this year's farming or fishing income is high, and taxable income for one or more of the base years was low.

Before you start:

• This election is possible even if the taxpayer didn't engage in farming or fishing during any of the base years.
• This election is possible even if the taxpayer's filing status was different in the base years.
• This election doesn't apply when figuring alternative minimum tax (Form 6251).
• This election doesn't require recomputation of returns of minor children who used the taxpayer's tax rates in the base years.

To generate Schedule J in the program:

1. Go to Screen 45.3, Income Averaging for Farmers and Fisherman.
2. Enter any applicable fields.

Additional important information:

• The checkbox at the top of the screen labeled Elect income averaging (code 21) is mandatory to generate the form.
• Entries must be made for the three preceding years in order to calculate the income averaging.
• If there isn't any current-year income, or the current year Schedule F or Farm Passthrough Entity generates a loss, the form won't generate.
• The Schedule J should only be attached to the return if the taxpayer is using the Schedule J to calculate the tax per the line instructions on page 2, line 23. If the calculation of tax using the regular tax tables provides a greater benefit to the taxpayer, the Schedule J will not print.
• The program determines if it is more beneficial to use the income averaging method or to calculate the tax on Form 1040. To override the automatic optimization, check the box labeled Force averaging regardless of tax.