how to recalculate your federal adjusted gross income

HOW TO RECALCULATE YOUR FEDERAL ADJUSTED GROSS INCOME (AGI) TO
COMPLY WITH MINNESOTA TAX LAW
You will need to use a desktop version of TurboTax in order to recalculate your federal AGI. If you are
using TurboTax online, click How to switch from TurboTax Online to TurboTax Software to find out how
to get TurboTax desktop version and save your online tax return to your desktop computer. Follow the
instructions carefully. When completed, return to this article to continue.
1. Open your tax return in desktop version of TurboTax. If you haven’t updated recently, update to the
latest version of TurboTax. To update, select Online at the top of the program and then select Check
for Updates.
2. Now you’re going to print ORIGINAL copies of your federal Form 1040 pages 1 and 2, and your federal
Schedule A and Form 8582 (if they are included in your return) and Minnesota Schedule M1NC,
including any supporting statements. We will refer to this printed copy of Schedule M1NC to
determine what areas of your federal return will need to be changed for Minnesota tax purposes.
3. Follow these steps:
a. Select Print Center.
b. Select Specific Forms > Form and supporting statements.
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Scroll down to locate Minnesota forms, select Schedule M1NC: Federal Adjustments in the forms list,
then choose Preview Print Copy.
c. Select the Printer icon > Print.
d. Write the words “original return” on the top of each sheet you just printed.
4. “Save as” your tax return using a new file name (for example, add the word “nonconforming” to the
end of your tax file name), because you WILL WANT TO BE SURE THAT YOU DO NOT FILE THIS “SAVE
AS” RETURN that you will be making changes to solely for Minnesota tax purposes.
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5. Look at the printed copy of your Minnesota Schedule M1NC. Which line(s) has an amount? Click on
the link for instructions to recalculate your federal AGI for that item.
Line 1, Line 2, and/or Line 3
Line 4
Line 8
I have an amount(s) on Schedule M1NC, Line 1 (Educator expense deduction) and/or line 2 (Tuition
and Fees Deduction and /or line 3 (Home mortgage debt cancellation)
You’ll enter the amount(s) on these line(s) as other income on your recalculated federal return.
Following these direction:
a. Select Federal Taxes > Wages & Income.
b. On How do…. Select I’ll choose what I work on.
c. Scroll down to locate the Less Common Income section and select Update (or Start) for
Miscellaneous Income.
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d. On the Let’s Work on Any Miscellaneous Income screen, scroll down and select Update (or
Start) for Other reportable income.
e. If you see Any Other Taxable Income? screen, choose Yes. If you don’t see the Any Other
Taxable Income? screen, go to step f below .
f.
On the Other Taxable Income screen, enter a brief description for each line item (for
example, MN Sch M1NC education expense)
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g. If you have more than one amount to enter, on the Other Miscellaneous Income Summary
screen, click Add Another Miscellaneous Income Item and enter the additional information.
If you have handled all of the amounts indicated on your Minnesota Schedule M1NC, you are done
recalculating your federal AGI with the various changes. Now you are ready to print out your
recalculated federal return and make the necessary adjustments. Click on this link to print return,
then continue with Step 7 for the instructions on how to complete the adjustments to your Minnesota
return.
I have an amount on Schedule M1NC, line 4 (IRA distribution excluded from federal income because it
was made to a charitable organization.)
First you’ll indicate that none of your IRA distribution was transferred to a charity. If you had a Schedule
A with the original return you printed, then you’ll also include that amount of the distribution (amount
on Schedule M1NC, Line 4) on your federal Schedule A as a charitable contribution.
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a. Select Federal Taxes > Wages & Income.
b. Scroll down to locate the Retirement Plans and Social Security section and select Update
for IRA, 401(k), Pension Plan Withdrawals.
c. Select Edit for the IRA distribution you transferred to a charity. See example below.
d. Scroll down to the bottom of the Enter Your 1099-R screen and select Continue.
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e. At the Did You Inherit This IRA? screen, select Continue.
f.
At the About This Retirement Account screen, just select Continue.
g. On the Transfer to Charity? screen, change your selection to “None of this distribution was
transferred to charity.” Then select Continue.
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If you have more than one IRA distribution that was transferred to charity, repeat steps a through g for
each IRA distribution that was transferred to charity.
If you have no more IRA distributions to edit, and you have a Schedule A with the original federal return
you printed, continue with steps below to enter your amount as a charitable contribution on Schedule A.
If you don’t have a Schedule A and have an amount on M1NC, line 14, click here. If not, click here to
print your return.
a. Select Federal Taxes > Deductions & Credits.
b. Select I’ll choose what I work on.
c. On the Your 2015 Deductions & Credits screen, scroll down to the Charitable Donations
and select Update (or Start) for Donations to Charity in 2015.
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d. If you see this Donations screen, choose Yes. Then go to step “f.” If you don’t see this
screen, go to step “e.”
e. If you see Review All Your Charities screen, click on Add Another Charity.
f.
On the Let’s enter your donations one at a time screen, enter the name of the charity and
choose Add next to Money
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g. On the Tell us about the money you gave to screen, choose One-time donation and enter
the amount transferred from your IRA account. Then choose Done with This Donation. TIP:
If you made more than one IRA transfer to the same charity, enter the total of the amounts
transferred to that charity.
If you have more IRA transfers to a charity that you need to enter as charitable donations for federal
Schedule A, repeat steps e through g above.
If you have handled all of the amounts indicated on your Minnesota Schedule M1NC, you are done
recalculating your federal AGI with the various changes. Now you are ready to print out your
recalculated federal return and make the necessary adjustments. Click on this link to print return,
then continue with Step 7 for the instructions on how to complete the adjustments to your Minnesota
return.
I have an amount on Schedule M1NC, line 8 - Modified depreciation for qualified leasehold
improvement, restaurant or retail improvement property place in service in 2015.
You’ll adjust the amount on Schedule M1NC, Line 8 was reported on a Schedule C or Schedule E
business, change the asset category the business used for qualified leasehold improvement, restaurant
or retail improvement property placed in service in 2015.
A. If you have a Schedule C with Modified depreciation for qualified leasehold improvement,
restaurant or retail improvement property place in service in 2015, follow these steps:
a. Select Federal Taxes > Wages & Income.
b. On the How do you want to enter your income, select I’ll choose what I work on.
c. On the Your 2015 Income summary screen, scroll down to Business Items section
and select Update for Business Income and Expenses.
d. If you see the Business Income and Expenses screen, select Yes.
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e. On the Business Summary screen, select Edit for the business with the modified
deprecation for qualified leasehold improvements, restaurant or retail improvement
property places in service in 2015.
f. Follow the screens until you see the Business Expenses screen.
g. On that screen, select Update for Assets and depreciation.
h. Continue until you see the Business Asset Summary screen.
i. Select Edit for the asset with the modified deprecation for qualified leasehold
improvements, restaurant, or retail improvement property placed in service in 2015.
j. Continue through the screens, until you see the Tell Us a Little More About Your
Business Asset screen for this asset.
k. Change the Asset type to J1- Nonresidential real estate.
l. Select Continue.
B. If you have a Rental Property with Modified depreciation for qualified leasehold
improvement, restaurant or retail improvement property place in service in 2015.
a. Select Business and Continue.
b. On the How do you want to enter your business income screen, select I’ll choose
what I work on.
c. In the Rental Properties and Royalties section and select Update.
d. In the next screen about Income from Rentals or Royalty Property You Own, select
Yes.
e. Select Continue on the Real Estate Professional screen.
f. On the Rental and Royalty Summary screen, select Edit for the rental with the
modified deprecation for qualified leasehold improvements, restaurant, or retail
improvement property placed in service in 2015.
g. Follow the screens until you see Review Your Rental Summary screen.
h. Select Update next to Assets/ Depreciation.
i. Continue until you get to Your Property Assets screen.
j. Select Edit next to any and all assets that you chose the modified depreciation
method.
k. Select Continue until you reach the screen Tell us a Little More About Your Rental
Asset. Uncheck Qualified leasehold improvements and Check Nonresidential real
estate.
l. Select Continue.
If you have handled all of the amounts indicated on your Minnesota Schedule M1NC, you are done
recalculating your federal AGI with the various changes. Now you are ready to print out your
recalculated federal return and make the necessary adjustments. Continue with Step 6 below. After
printing, continue with Step 7 for the instructions on how to complete the adjustments to your
Minnesota return.
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6. Print Return:
a. Select Print Center.
b. Select Specific Forms > Form Only.
c. Select Form 1040 in the forms list, then choose Preview Print Copy.
d. Select the Printer icon > Print.
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Instructions on how to complete the adjustments to your Minnesota return
7. You now need to determine the differences to enter on the Other Adjustments to Federal Form
1040(1040A) Due to Recomputed Amounts.
You’ll subtract the original amount from the new amount and enter the difference on this
interview screen. NOTE: If you don’t have any of these items, you won’t see this interview
screen and continue with Step 8 and Step 9.
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Here’s an example for social security income.
Adjustment
1040
Line
Social Security
Income
1040,
20b
Original Recalculated Subtract original
amount amount
amount from new
amount. Enter the
difference on
interview screen as
a positive number
32,000 33,000
1,000
See below to figure your amounts to enter on the interview screen.
If you have an amount on federal Form 1040, line 20b (social security income)
Line 1
Line 2
Line 3
Original federal Form 1040, line 20b
Recalculated federal Form 1040, line 20b
Subtract line 2 from line 1 –enter in interview
as a positive amount
$
$
$
If you have an amount on your federal form 8582, page 1, Part II, line 10 (real estate
loss)
Line 1
Line 2
Line 3
Original form 8582, page 1, Part II, line 10
Recalculated form 8582, page 1, Part II, line 10
Subtract line 2 from line 1 –enter in interview
as a positive amount
$
$
$
If you have an amount on your federal Form 1040, line 33 (student loan interest
deduction)
Line 1
Line 2
Line 3
Original federal Form 1040, line 33
Recalculated federal Form 1040, line 33
Subtract line 2 from line 1 –enter in
interview as a positive amount
$
$
$
If you have an amount on your federal Form 1040, line 32 (IRA deduction)
Line 1
Line 2
Line 3
Original federal Form 1040, line 32
Recalculated federal Form 1040, line 32
Subtract line 2 from line 1–enter in
interview as a positive amount
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$
$
$
8. Note: If your original federal return did not have a Schedule A, you can ignore No. 8 and No. 9.
If your Schedule A has an amount on line 4 (medical and dental expenses), line 20 (casualty
and theft losses) and/or line 21 (unreimbursed employee expenses, etc.), you’ll need to look
at your original Schedule A and your recalculated Schedule A to see if there is a difference.
If there is a difference, you will enter the total amount on this interview screen. Enter as a
positive amount. (See adjustment worksheet below to help calculate the adjustment.)
Adjustment
Medical and
Dental Expense
Schedule Original Recalculated Column (1) less (2)
A Line
amount amount
(1)
(2)
Line 4
$
$
$
Casualty and Theft Line 20
Losses
Unreimbursed
Line 21
Employee Exps
TOTAL
$
$
$
$
$
$
$
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9. If you had an IRA distribution excluded from federal income because it was made to a charitable
organization, or you had charitable contributions limited on your original federal return you’ll need
to look at your original federal Schedule A and your recalculated Schedule A to see if there is a
difference on line 19 (gifts to charity).
If there is a difference, you will enter the amount on this interview screen. Enter as a positive
amount.
See below to figure your amounts to enter on the interview screen.
Line 1
Line 2
Line 3
Original Schedule A, line 19
Recalculated Schedule A, line 19
Subtract line 2 from line 1 –enter in interview
as a positive amount
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$
$
$