TurboTax flaw

[MichaelB]

My return was rejected because of a flaw in TurboTax, I thought I'd share in case it affects anyone else. Once corrected the return was accepted.

My estimated tax payments were greater than the tax due, so I have a refund. TT nonetheless completed and filed form 2210 - Underpayment of Estimated Tax, with the box "requesting a waiver' checked. IRS rejected this because the required explanation was not attached. The TT / IRS error message

F2210-003 - If Form 2210, Part II, Line A checkbox 'WaiverOfEntirePenaltyInd' is checked, then [WaiverExplanationStatement] must be attached to Form 2210.

This is apparently a common complaint, Google search autofill went straight to "Form 2210" when I typed "TurboTax form" and '00's of hits showed with multiple suggestions.

The TT support forum says to delete the form but it can't be deleted - TT just generates a new one. The only thing that worked for me was to open the "step by step" to calculate a penalty and input all 2017 values with "0".

So, even though my estimated tax was greater than the tax due, I had to force TurboTax to calculate the underpayment penalty, then input bogus numbers for the previous year amounts.

​

 

[REWahoo]

That warm, fuzzy feeling you get from paying for quality tax preparation software cooling a bit? What a PITA.

 

[EQMAN]

I had the same problem but solved it differently. I went into forms view and entered that no penalty was due because my estimated payments were greater than my taxes under Part 2 box B. After that change the IRS accepted my return.

 

[target2019]

My Form 2210 was updated for the 85% waiver. Could you have filed b4 that update? The waiver eliminated my small plenty. We'll see if this causes a problem (Still waiting for a K-1).

 

[audreyh1]

Hmmm - that might affect us since we’re filing 2210 this year. But I’m pretty sure we will still owe a little. Thanks for the heads up.

 

[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.

 

[MichaelB]

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.

That is a valid reason, but in this case, it is a pure program mistake. Form 2110 Part 1 can be completed, but Part 2 lists 5 "reasons for filing" and if none apply, Form 2110 should not be filed. TurboTax nonetheless selected reason "A", asking for a waiver when none is needed, filing the form and prompting the IRS to reject it.

 

[COcheesehead]

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.

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.

 

[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.)

 

[RunningBum]

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 should've been able to fill out form 2210 to explain the timing and avoid the penalty if it was fed. Can't say if all states do this.

 

[cathy63]

According to Intuit, there was an update on 2/16/2019 that addressed a similar situation, but the screenshot they give is showing that the review process was catching the erroneous checkbox. It sounds like in your case the review didn't tell you there was an error or stop you from filing, so you have a slightly different issue, but it might also have been addressed in that same fix.

https://ttlc.intuit.com/questions/4608028-resolved-check-this-entry-form-2210-part-ii-box-a-should-not-be-checked

 

[Skeptic]

I'll just interject that Intuit is only claiming that there is a way to address this issue that will still allow you to e-file if you've got the download version on Turbotax. If, on the other hand, you're using the online version, then currently your only recourse is to print out the entire return, extract the erroneously filed Form 2210, and snail-mail it all the IRS.

https://ttlc.intuit.com/questions/4612553-electronic-filing-rejection-code-f2210-003

But wait, there's more! If you don't e-file your Federal return then you can't e-file your state return. However, apparently some states (NY, e.g.) *only* accept e-filed returns. So for people in those states, buying the online version of TT has been a complete waste of $100 this year. That's why I'm kinda betting that Intuit will figure out a fix.

 

[Elderdude]

I filed both Fed and State using Turbo Tax. I got the same message the first time I e-filed. Fed return failed because of the 2210 kerfuffle. After trying to figure out how to fix it five or six times, hit "help," Form 2210 and found an answer written by "ipackj". It worked, both my tax returns have been accepted. The great thing about filing online with Turbo Tax is that you can correct errors on the return and refile and it doesn't cost you any more. I'm pretty sure Intuit will fix the error sooner than later. (The state return fails for lack of a correct fed return.)

 

[bobandsherry]

Had problem with TT years ago, switched to HRBlock and haven't looked back.

 

[donheff]

But wait, there's more! If you don't e-file your Federal return then you can't e-file your state return. However, apparently some states (NY, e.g.) *only* accept e-filed returns.

WTF? What do you do if you can't figure out a Federal e-file method?

 

[MichaelB]

According to Intuit, there was an update on 2/16/2019 that addressed a similar situation, but the screenshot they give is showing that the review process was catching the erroneous checkbox. It sounds like in your case the review didn't tell you there was an error or stop you from filing, so you have a slightly different issue, but it might also have been addressed in that same fix.

https://ttlc.intuit.com/questions/4608028-resolved-check-this-entry-form-2210-part-ii-box-a-should-not-be-checked

I have the 2/16 version and still got the error. TT would not let me uncheck the box. The review did not identify the error. As errors go, this one wasn’t too hard to fix - it took me about 90 minutes to figure out what was happening, look for suggestions, try them, find one that worked, then re-file.

I think the most irritating part was the TT error system which constantly referred to this as “my error” and “their effort to help me fix it”. In fact, it was their error, and the fix came from anothe4 user.

 

[camfused]

Here is another "bug". My daughter signed up for a class that started this January. We paid the bill for the class, using her 529 funds, in December. The school sent us a 1099 Q.

I entered it into TT. It asked if she attended a college in 2018. I said no, since the class started this January. It charged us taxes on the money. If I answer that she did attend in 2018, it does the right thing and does not tax on the money. This forces me to lie.

 

[grasshopper]

My Form 2210 was updated for the 85% waiver. Could you have filed b4 that update? The waiver eliminated my small plenty. We'll see if this causes a problem (Still waiting for a K-1).

This was me with a $4 penalty and a $466 overpayment TT checked off the waiver box. I will pay more attention to my estimated tax payments. I usually send in a couple of bucks when I do a Roth conversation and or a LTCG sale even though it isn't taxed. Just to feed the IRS g*ds.

 

[db79]

You should've been able to fill out form 2210 to explain the timing and avoid the penalty if it was fed. Can't say if all states do this.

That's what I ended up doing when I received the same error which allowed my return to be accepted. Attached an explanation explaining the situation (essentially the TT flaw) and requesting waiver of any penalty.

 

[GTFan]

I'll just interject that Intuit is only claiming that there is a way to address this issue that will still allow you to e-file if you've got the download version on Turbotax. If, on the other hand, you're using the online version, then currently your only recourse is to print out the entire return, extract the erroneously filed Form 2210, and snail-mail it all the IRS.

The fix I made for online TT was to zero out the 2017 tax liability (Other Tax Situations->Underpayment Penalty menu), then 2210 is not generated. We had no penalty for underpayment and this did not affect anything else on the return. There is no other way I found with online version to keep it from trying for the waiver instead of calculating the penalty first (and then not filing 2210 as a result if there is no penalty). That's the bug they have to fix.

The dumb part is that the IRS always does the penalty calc anyway, so IMO TT should make it optional in all cases (and of course notify you if it thinks you have a penalty due so you can file it if you wish, with or without the waiver request). I think they send you a bill if one is owed, and it's usually a minor sum in any case.

 

[audreyh1]

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]

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]

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.