2022-29: Taxpayers are missing out on California business losses

We’ve received numerous e-mails and message board posts from tax professionals who noticed a problem when preparing 2021 California returns for clients with excess business loss carryovers from the prior year.

The FTB has confirmed that because of information missing from the instructions for Form 3461, California Excess Business Loss, prior-year losses are not being properly carried forward and applied to 2021 tax returns. The FTB has been quick to address this issue and is correcting the 2021 form instructions. This will result in updates to your tax software. In the meantime, we recommend you hold off filing extended 2021 returns for clients who have an excess business loss carryover.

Affected taxpayers whose 2021 returns have already been filed must file amended returns to correct this issue.

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