@grich01R wrote:
I omitted to add that it was a letter from the IRS that I received, with no request to pay, just that "We are auditing your 2020 tax return and need you to send additional information to support the following items claimed on your return - Schedule A Interest"
OK, it looks like turbotax calculated 0.711 instead of 0.709, I'm not going to try and chase down the difference.
If Turbotax really did enter the full $37.9K on line 8a of schedule A instead of the adjusted $26.9K, that definitely seems like a program fault. This is what I would do at this point.
1. Save a copy of your original tax return and your original turbotax data file in a safe place, before making modifications. If you filed online, you can download the data file, if you filed on your computer, it will be in your Documents folder someplace with a name like "John Smith tax.tax2020". You need the original, unmodified file for your guarantee claim.
2. Prepare an amended return with the correct interest amount. If Turbotax still calculates it incorrectly, manually enter the correct amount.
3. Write a letter back to the office that requested the information. Include a letter of explanation, your new calculations, and a copy of the amended return. Don't send the amended return to the address for filing amended returns, just send it to the office that sent the audit letter. If you owe additional tax, pay that amount online -- don't include a check with the letter. Go to www.irs.gov/payments and make a direct payment. Select the most appropriate reason (letter number or tax assessment or amended return), form 1040, and 2020. Just pay the tax amount, not any penalties or late fees or interest. In your letter that explains the adjustments, include the fact that you made a payment online. Send the letter using a mail service that has tracking and proof of delivery.
3a. If the IRS indicates they want to see proof of your interest payments and mortgage balances, you should also include copies of your mortgage statements or the annual summary from the mortgage lenders. My guess is they think your balance was more than allowable. If you admit your balance was more than allowable and you provide a correction, they might not need proof of the actual balance, but they might want it anyway.
3b. You can try calling the office that sent the notice. If you get through, and explain what happened, they might be willing to accept a letter of explanation without needing all the proofs. Or they might have different instructions for you.
3c. You should double-check the allowable interest deduction using the actual instructions for 2020. They are here. https://www.irs.gov/pub/irs-prior/p936--2020.pdf
3d. Remember that you need to look at the average balance for the year. If your January outstanding principal balance was $900,000 and your December balance was $880,000, then the worksheet will use the average of $890,000. That may explain why the figures you cite are slightly different than Turbotax's calculation.
4. Wait and see what happens. If the IRS sends another letter assessing penalties or interest for late payment, pay it (to stop the fees from growing) and then file a claim with the Turbotax Accuracy Guarantee. If Turbotax agrees it was their fault the wrong interest deduction was claimed, they should reimburse you for the late fees.
(You mail the letter but make the payment online so the payment doesnt get lost, and because the sooner you make the payment, the less interest you owe. You must file the accuracy claim within 30 days of getting a bill for interest and penalties, and you can't file the claim until you actually get a bill, which is why you wait instead of doing it now, and why you only pay the tax and wait for a bill for late fees. There's a chance the IRS won't bill you.)
https://ttlc.intuit.com/turbotax-support/en-us/help-article/account-management/turbotax-100-accurate...
