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Get your taxes done using TurboTax
I found this thread very helpful, thanks everyone.
For future victims, here's some guidance, at least for 2023 taxes (I'm guessing it will be fixed for 2024).
I received a letter from IRS saying "Form 4626...was... not attached or incomplete. Complete...all...of...4626."
Look at your Form 1120, Schedule K, line 29 (thanks to the person who figure this out). I found that Turbo Tax (TT) marked/checked my 29a, 29b, and 29c all as NO. For any business with less than $100,000,000-$1B income (and no groups of corporations etc.), they should probably be NO, BLANK, and YES. If 29c is NO, you need to fill out Form 4626. If 29c is YES, you are exempt from 4626. There are clear bugs in TT here: if 29a is NO, TT should always leave 29b blank but doesn't. The step-by-step process of TT asks for your information that controls 29a but not into 29c.
You can send a 4626 to the IRS but it's quite complex. I elected to submit a 1120X amended return to the IRS. I decided this because it seemed somewhat easier to me than figuring out 4626 and because I was a little concerned if I submitted 4626 for 2023 I might need to do it for 2024, 2025, 2026... Note that IRS publications suggest IRS might take many months to process an amended return, which would probably delay a refund.
You amend a return by restarting TT and selecting Amend a Return near the start. Go to Forms view, 1120 pages 3-6 and manually change the answers for question 29a, 29b, and 29c, to NO, BLANK, and YES (in most cases). TT will give you a box to explain the changes, I wrote:
"1120 Sch K line 29b, changed from NO to LEFT BLANK, Turbo Tax erroneously entered NO against the explicit IRS directions in line 29a.
"1120 Sch K line 29c, changed from NO to YES, Turbo Tax erroneously entered NO; TT did not ask us for any information about this very complex issue before electing to enter NO.
Due to the 29c error above, we received IRS letter number XXXXX asking us to submit IRS form 4626. After 29c is corrected , 4626 is no longer required and we are not sending it to IRS."
Then submit your 1120X (2 pages) and corrected Schedule K of Form 1120 (2 pages) to the original IRS address you used for your original return.
Separately, I sent a reply to the IRS letter saying:
"After reviewing the IRS letter referenced above, I have filed an amended 1120 return via US Postal Service certified mail to Internal Revenue Service, Ogden UT [removed]. I have attached copies of the amended return and the [NUMBER OF THE IRS LETTER] letter.
In form 1120, Schedule K of the original return, line 29b was erroneously answered NO and line 29c was erroneously answered NO.
On the amended return, line 29b is now correctly LEFT BLANK and line 29c is correctly answered YES. Because line 29c is YES, “the corporation is not required to file Form 4626.” I am therefore disregarding the directions in the IRS letter and am not sending 4626 with this letter.
The Corporation is a very small company and has an income a tiny fraction of the thresholds for requiring Form 4626. I relied on Intuit Turbo Tax to produce the return. Turbo Tax has a very clear bug in that it produced a return with NO on line 29b when the explicit IRS instructions for line 29a say that line 29b should be skipped (LEFT BLANK) under the circumstances in the return. Turbo Tax has a less clear bug in that it did not ask for any information to determine if it should answer YES or NO on line 29c. Line 29 does not appear prior to tax year 2023 and refers to an extremely complex issue.
I found this website slightly useful in attempting to understand the situation:
I believe these actions satisfy the requirements of the letter. Please contact me if you require further action on my part."
I guess this is not doing exactly what the IRS letter says (send a 4626) but it seems appropriate to me. I hope it works.
Question 29 is new for tax year 2023, it doesn't appear in 2022 or earlier. I interpret it as an attempt to suppress tax avoidance by very large corporations. Virtually no company who would use Turbo Tax would have the income level to trigger the need to submit 4626.
I'm really angry with Turbo Tax about this, it wasted a day of my time. They've probably caused at least 100,000 companies to need to spend 4-10 hours dealing with this, a cumulative wasted time value of very roughly $50M.
I am guessing at least this will be fixed in the 2024 version of TT.
