I'm filing an extension to my client's 2018 1040 with a carryback loss from 2019. Seems to be fine on the federal side. However, on the California side (location of the client business), the carryback loss is ADDED to the AGI as opposed to reducing it. I know that California is presently not allowing 2019 carrybacks, but why would a carryback be adding to the client's gross income?

For 2019, my client's S-Corp had a $44k loss. How can I carryback this loss against the company's $18k income of 2018? I filed both 2019 and 2018 1120S returns, before realizing I could use the carryback. Do I need to file amendments for both years, or just for 2018? And, exactly how do I go about implementing the carryback within ProConnect? TIA.

I'm new to doing 1120S returns, so excuse my ignorance on this. I have two co-owners of an S-Corp who are 50/50 shareholders. They only started taking W2 compensation in 2018, and I am helping them file 2018 taxes (yes, they're well aware that they are late). My question: do I report their W2 income from the business on line 8 of the 1120S (Salaries and Wages), or line 7 (Compensation of Officers), or somewhere else? Also, do I then report those same W2 payroll transactions to the principals as income on their 1040?