TurboTax flaw

[audreyh1]

Quote:

Originally Posted by Crabby Mike I could be misremembering, but I've run into this timing issue in the past, and I think the IRS assumes income was received ratably across the year unless you tell them differently. This can work for or against you. IIRC I took a large capital gain in 4Q, and paid a higher 4Q estimated accordingly, but was penalized for not paying enough earlier in the year. (Now that I think of it, it may have been a state, not Fed, issue.)

You fill out Form 2210 to avoid this penalty. You just have to show how much income you earned during each tax quarter. You do have to compute the estimated taxes that were due each tax quarter to prove that you met that criteria.

[Popeye]

I just opened TurboTax and it downloaded an update. It indicates that this flaw is now fixed.

[audreyh1]

Quote:

Originally Posted by COcheesehead This is true. You must pay at the time the tax is incurred. If paid later in the year, even if overpaid, you still might have a penalty. The problem with the form 2210 just means you can't efile. You can still mail in your return.

Apparently this IRS 85% waiver also waives any timing requirement in paying estimated taxes as long as you paid 85% of what is owed by Jan 15 2019.

[audreyh1]

Quote:

Originally Posted by Popeye I just opened TurboTax and it downloaded an update. It indicates that this flaw is now fixed.

I’m not so sure this flaw is fixed. TurboTax checked this 85% waiver for us, but we filled out all the stuff to indicate that we don’t owe a penalty due to the annualized income method, but TT won’t let us uncheck the 85% waiver box. I’m hoping some override instructions will work for us. Right now we have two boxes checked on reasons for filing 2210.

[Paracelsus]

I had the same issue with Form 2210 - I started with the 85% waiver language attached, then it went through two more checkmarks on the form. I went and filled out the form directly in Turbotax and it still sent me errors. I had a refund coming from overpaying estimated taxes. I finally printed out my tax form and sent that in and received my tax rebate this week. This was the first year I've ever had to deal with that form - hope it doesn't happen in 2019.

[COcheesehead]

Quote:

Originally Posted by Paracelsus I had the same issue with Form 2210 - I started with the 85% waiver language attached, then it went through two more checkmarks on the form. I went and filled out the form directly in Turbotax and it still sent me errors. I had a refund coming from overpaying estimated taxes. I finally printed out my tax form and sent that in and received my tax rebate this week. This was the first year I've ever had to deal with that form - hope it doesn't happen in 2019.

I just ended up mailing mine too. I got my refund in about 3 weeks. Hope this was a one year glitch.

[audreyh1]

This sucks. I hope we can override and eFile.

The 85% thing only applies for 2018, so it should not happen next year.

[RetMD21]

TT is annoying. I don't like reentering my routing and account number every year.

[audreyh1]

Quote:

Originally Posted by RetMD21 TT is annoying. I don't like reentering my routing and account number every year.

They don't have that information from us as we use EFTPS.

But frankly I'm glad they don't save that sensitive information and require you to reenter it.

[RE2Boys]

Hot from the IRS and another software change:

1. IRS Expands Penalty Relief for Taxpayers Whose Payments Fell Short in 2018
The IRS provided additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year by lowering to 80 percent the threshold required to qualify for this relief. The IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.

The revised waiver computation will be integrated into commercially-available tax software and reflected in the forthcoming revision of the instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. The IRS urges everyone to take a Paycheck Checkup and review their withholding for 2019. Additionally, the updated Withholding Calculator is now available on IRS.gov.

[audreyh1]

We haven’t tried submitting our return as we aren’t quite finished, but I reviewed the instructions for the 2210 and they say to check all reasons that apply for not owing or reducing a penalty. So we have both the 85% waiver and the uneven income cases checked. It should submit the full 2210 including the 2210 AI, so I’m thinking that it should go through OK and we won’t get an error due to incomplete 2210.

Or at least I’m hoping.

[cathy63]

TTax included form 2210 in my Mom's return. She had the 85% waiver box checked and it attached a text statement saying that it was requesting the 85% waiver. Her return was e-filed and she already got her refund.

The entire 2210 was not needed, because TTax should have been able to figure out that she didn't owe a penalty based on the dates for her estimated payments, but the IRS didn't seem to object to her filing it anyway.

[audreyh1]

Quote:

Originally Posted by cathy63 TTax included form 2210 in my Mom's return. She had the 85% waiver box checked and it attached a text statement saying that it was requesting the 85% waiver. Her return was e-filed and she already got her refund. The entire 2210 was not needed, because TTax should have been able to figure out that she didn't owe a penalty based on the dates for her estimated payments, but the IRS didn't seem to object to her filing it anyway.

Thanks, good to know.

[zesty]

Quote:

Originally Posted by SecondCor521 As an extreme example, if you earned a lot of money in Q1 2018 and created a tax liability of $10,000, and then sent in an estimated tax payment of $10,001 in Q4 2018, then your estimated tax payments would exceed your liability but you still might owe an underpayment penalty.

Is this something that the IRS can realistically determine apart from an audit?

[SecondCor521]

Quote:

Originally Posted by zesty Is this something that the IRS can realistically determine apart from an audit?

It would depend on the nature of the income. If it was from stock sales, then in theory they could calculate at least that part of the tax liability. But I doubt they do.

[audreyh1]

Quote:

Originally Posted by SecondCor521 I believe it is still possible to have an underpayment penalty even if the total of one's estimated tax payments exceeds the tax liability. This is because estimated tax payments are treated differently from withholding. Withholding at any point in the year can cover an income tax liability created at any point in the year. But with estimated tax payments, the timing of receipt by the IRS in relation to the creation of the income tax liability can affect whether an underpayment situation exists. As an extreme example, if you earned a lot of money in Q1 2018 and created a tax liability of $10,000, and then sent in an estimated tax payment of $10,001 in Q4 2018, then your estimated tax payments would exceed your liability but you still might owe an underpayment penalty. MichaelB, I'm guessing that the total of federal income taxes withheld was less than your tax liability? If so, TurboTax was probably correct in filling out Form 2210. Although there are other options on Form 2210 besides requesting a waiver, so it should have asked you about that.

Not for 2018. All the timing issues for estimated taxes have been waived for 2018 as long as you paid 85% of the taxes owed by Jan 15, 2019.

[audreyh1]

Quote:

Originally Posted by zesty Is this something that the IRS can realistically determine apart from an audit?

Not really, so you need to save documents that support your income timing.

But not for 2018 .

[COcheesehead]

Quote:

Originally Posted by RetMD21 TT is annoying. I don't like reentering my routing and account number every year.

Would you really want them to retain that...
#wirefraud #forgotyouchangedaccounts

[audreyh1]

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Originally Posted by COcheesehead Would you really want them to retain that... #wirefraud #forgotyouchangedaccounts

Agreed!

[SecondCor521]

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Originally Posted by audreyh1 Not for 2018. All the timing issues for estimated taxes have been waived for 2018 as long as you paid 85% of the taxes owed by Jan 15, 2019.

Interesting. I knew about the lower threshold percentage (which was further lowered to 80% just a few days ago), but I understood that to be just for the threshold amount and the timing of income would still matter. But it seems you are correct.

https://www.irs.gov/newsroom/irs-exp...-to-80-percent

"This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two."