IRS not allowing to change to itemized deductions

[rosengac]

I originally completed my 2023 taxes and used the standard deduction of $27,700 but noticed by VA state standard deduction was only $16,000 which caused me owing versus getting a refund like I did in 2022.  I went back and filed an amended 2023 return to change from the standard deduction to itemized deduction ($26,948).  However, I received a letter from the IRS stating my itemized deductions should be larger than the standard deduction.  I called the IRS to see why I couldn't elect itemized deductions which saved me $619 in my state return and only having to pay an extra $158 back on my Federal return.  The IRS rep stated I didn't have a choice and could only elect the standard deduction as it was higher and provided me how to look on the IRS website that dictates this policy.  Is this true?  If so, turbotax software shouldn't allow you to pick between the standard or itemized deduction if the itemized deduction is lower.

[ShannonDuff · Accepted solution]

Yes it is true that the IRS requires you to use the highest deduction whether it be Standard or Itemized. The only time taking a lower deduction instead of the higher is in cases when filling status is MFS and one spouse itemizes forcing the other to do so. This resource gives you a link to the Standard vs. Itemize calculator which can help you determine which one you are eligible for. 

https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/standard-vs-itemized-tax-deductions-ca...

[VolvoGirl]

I don't know about VA but some states let you take itemized deductions even if you take the Standard Deduction on federal.  

[ShannonDuff]

Unfortunately, VA does not allow you to itemize if you took standard deduction on the federal. return.https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2023-schedule-a-instructions.pdf

[TaxProSER]

While it is true that some states allow taxpayers to itemize for the State even if they claimed the standard deduction for Federal, Virginia (the state that is the subject of the original post), does not.    If you take the Federal standard deduction, you must take the standard in VA and if you itemize on Federal, you must itemize in VA.

[VolvoGirl]

I looked at IRS pub 501 and it sounds like you can choose which method you want to take. It says you SHOULD take....it doesn't say you HAVE to take the higher one.

IRS pub 501 page 22 says

https://www.irs.gov/pub/irs-pdf/p501.pdf

Most taxpayers have a choice of either taking a Standard Deduction or itemizing their deductions.  If you have a choice you can use the method that gives you the lower tax.

[ShannonDuff]

While I do not see a definitive answer on that the topic for no. 501 does state:
"You should itemize deductions on Schedule A (Form 1040), Itemized Deductions if the total amount of your allowable itemized deductions is greater than your standard deduction or if you must itemize deductions because you can't use the standard deduction. You may also want to itemize deductions if your standard deduction is limited because another taxpayer claims you as a dependent. Itemized deductions, subject to certain dollar limitations, include amounts you paid, during the taxable year, for state and local income or sales taxes, real property taxes, personal property taxes, mortgage interest, disaster losses, gifts to charities, and part of the amount you paid for medical and dental expenses." Topic NO. 501 
IRS.govhttps://www.irs.gov/taxtopics/tc501
If the information does not seem correct to you, I would call the IRS again and ask in what PUB or Notice is this information listed.

[xmasbaby0]

@rosengac I think there is a  miscommunication somewhere in here.   You are not required  by the IRS to use your itemized deductions unless you are filing married filing separately and your spouse is itemizing deductions, because if you file MFS both spouses have to file the same way.   If your itemized deductions do not exceed your standard deduction, the TT software will default to standard deduction unless you FORCE itemizing.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income. The standard deduction makes some of your income “tax free.”  It is not a refund.  You will see your standard or itemized deduction amount on line 12 of your 2023 Form 1040.

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

If you want to skip entering your itemized deductions you can do that.  Many people will not have enough itemized deductions this year to itemize, and will just be getting their new higher standard deduction.  The thing is, though, that some of those deductions could make a difference on a state return even if they do not affect your federal return.  Information flows from your federal return to your state return, so it might not be a bad idea to go ahead and enter them anyhow.  It cannot hurt you.

The following states allow you to itemize deductions on just the state return: Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Iowa, Kansas, Kentucky, Minnesota, Mississippi, Montana, New York, North Carolina, Oregon, and Wisconsin, 

HOW TO FORCE ITEMIZED DEDUCTIONS

https://ttlc.intuit.com/questions/1900142-how-do-i-change-from-the-standard-deduction-to-itemized-or...

[rosengac]

Per the 501 publication you referenced; Electing to itemize for state tax or other purposes. Even if your itemized deductions are less than your standard deduction, you can elect to itemize deductions on your federal return rather than take the standard deduction. You may want to do this if, for example, the tax benefit of itemizing your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. To make this election, you must check the box on line 18 of Schedule A.

Thank you so much for the reference.  I called the IRS and they only stated I didn't have a choice but to claim the standard deduction

[rosengac]

Per the IRS 501 publication; Electing to itemize for state tax or other purposes. Even if your itemized deductions are less than your standard deduction, you can elect to itemize deductions on your federal return rather than take the standard deduction. You may want to do this if, for example, the tax benefit of itemizing your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. To make this election, you must check the box on line 18 of Schedule A.

I'm allowed to itemize my federal return because my state tax return is greater than losing the federal return by not taking the standard deduction.