Iowa 124

[bjscheel]

Anybody working with the new Iowa 124 form?  I have a client who needs to manually limit the federal NOL to 80%.  When I do that, the IA124 line 1 is pulling the limited NOL.  Line 2 is the actual deduction which is the same number, leaving nothing for carryover to 2024 for Iowa. 

When I don't limit the federal NOL, it pulls the full amount to line 1, minus the deduction taken, and leaves some for the following year.  Which I think is correct, other than line 2 should be the limited amount.

[MicheleLB · Accepted solution]

If you choose the "Current Year NOL" button on screen 15 there are places to override the amounts on the IA Form 124 to account for the correct federal carryover. I'm trying to figure out how to populate the IA NOL on Part II of this form. Line 4 should be the income attributable to Iowa, there isn't a place to override this amount and it's not calculating correctly. 

[bjscheel]

Great, that fixes that part.  To populate a different Iowa NOL for Line 1 of Part II, you can do that in the Iowa Net Operating Loss section of Screen 15.

As to Line 4 of Part II, in the instructions to the 124, it says it comes from line 4 of the IA1040 (without accounting for the NOL adjustment).  As far as I can tell, Lacerte is doing that.  I just looked at one and if I take the IA1040 line 3, then go to Iowa Schedule 1 and make the adjustments except for the NOL lines, it comes up with the same number as on the 124 line 4.

So maybe Lacerte is doing it right according to instructions?  BUT, I really question if this is Iowa's intended outcome.  I have a client with a large NOL.  His line 4 income without the NOL adjustments is negative, so $0 on 124 Part II line 4.  The effect is $150,000 of federal NOL being added to income, and no Iowa NOL being deducted.  So he is paying Iowa tax on $150,000 NOL! Maybe that's right but it feels very wrong. Of course this is a March 1 farmer. 

I sent an email to IDOR, but they probably won't answer fast enough.  I might try calling.

[bjscheel]

I spoke with IDOR and am supposed to get a call back from someone who knows more.  While talking with her though, I'm thinking it is a Lacerte issue.  The instructions say line 4 of Part II is IA1040 line 4 (without accounting for the Iowa pre-2023 NOL adjustment from Schedule 1).  I was reading that as "without accounting for the NOL adjustment".  

But if we can keep the federal NOL adjustment in that calculation, then yes, my client's income is a large positive number on IA1040 line 4 and I would think should show up on the IA124 Part II line 4 and allow a large Iowa NOL.  Is that what you are thinking?

If I get that call back from IDOR I will update and maybe we need to call Lacerte.

[MicheleLB]

Yes, I'm thinking the number from step 4 line 4 should flow to the form 124 part 2 line 4, even when there is a large number in step 4 it carries a different number to the form 124.

[bjscheel]

Iowa is supposed to be calling me back about how that is supposed to be calculated.  In the meantime, I just spent 2 hours on the phone with Lacerte.  So far they are maintaining that the calculation is correct per the instructions.  But I can submit a challenge to the calculation.  I'll wait and see if I hear from IDOR today to confirm my thoughts are right.

[MicheleLB]

Great! Thanks for the update!

[bjscheel]

After today's software update, there is a box on Screen 15 Current Year (just below the box you pointed me to the other day) where you can now override the Part II line 4 calculation!  BUT I put in my override and so I have like $90,000 in line 3 and $47,000 in line 4.  Then line 5 says to enter the lesser of Line 3 and 4 and Lacerte puts in $4000 (what they were previously calculating for line 4).

So still not a fix.  I will try the calculation challenge link they gave me.

[StormFS]

I have gotten 2 letters on farmers from the state of Iowa taking away their NOL completely.  Both have large enough incomes to fully use their NOLs this year.  Has anyone else had this?  Thank you!

[bjscheel]

For what tax year?

[StormFS]

For 23 that I just filed.

[bjscheel]

Wow that's really fast to be getting letters already.  Did the returns you filed show a NOL being allowed on Form 124 because it was not until about 3/1 that Lacerte seemed to get it updated the way I think it should be done. 

I got an email from IDOR on 2/29 saying they were researching the 124 calculation question I sent and that they hoped to answer me on 3/1 or 3/4.  Nothing yet.  I will follow up with the rep.

[StormFS]

Agreed.  I did double check my PDF of the return, that I saved that matches what the state received from me and what Lacerte has now.  Nothing has changed on the 124.  I have faxed in copies of the letters and POA with a letter to contact me, only sent yesterday.  These were farmers so I needed to file by March 1 or I would have waited.