TurboTax Software Error – Incorrect Default Setting Caused Miscalculation of Taxable Social Security

Forum|Forum|1 year ago
May 10, 2025
4 replies
183 views

I am writing to report a critical issue I encountered while filing my 2024 tax return using TurboTax.

My adjusted gross income was $48,000, and a portion of my income came from Social Security. However, TurboTax failed to correctly calculate that 85% of my Social Security benefits should have been taxable based on my income level. As a result, I recently received a notice from the IRS assessing additional tax owed.

Upon reviewing the return and investigating the cause, I discovered that in the "interview" section of TurboTax, the question "Are You a U.S. Citizen Living Abroad in One of These Countries?" defaults to "YES." This is highly problematic. I am a U.S. citizen living in the United States with a U.S. mailing address. I did not actively use the Interviewer, as I have over 40 years of experience preparing taxes and typically work directly with the forms.

This incorrect default setting caused TurboTax to incorrectly exclude a portion of my Social Security income from taxation, leading to a tax deficiency and IRS notice. After researching this further, I found that numerous other users have reported the same issue, yet the software has not been corrected.

This default makes no logical sense for the vast majority of TurboTax users who live in the United States. I urge you to address this issue immediately in your software and provide guidance on how users can ensure it is set correctly. Additionally, I would appreciate information on how TurboTax plans to assist affected users who incurred penalties or interest due to this programming flaw.

TurboTax Home & Biz Windows

rjs

Level 15

In the current desktop TurboTax software, with the most recent updates, the question in the interview does not have a default. You have to select either Yes or No in order to proceed. In forms mode the default is effectively No. There is no Yes or No choice on the worksheet. There is a box that has to be checked to indicate Yes, and by default the box is not checked.

Of course, if you return to the question in the interview after Yes has been selected, it will still have Yes selected. That is not a default. That is showing the previously selected answer. You only see a default, if any, the very first time you go to the Social Security topic in a return where Social Security has not previously been entered.

This question is new this year. It's possible that earlier in the season it had an incorrect default, which has since been corrected. If you paid penalties or interest because of the error you can submit a claim under the Accurate Calculation Guarantee.

lchriste

Level 2

I received a refund that is over $1500 less than what TurboTax calculated. The IRS says it is because of a miscalculation regarding Social Security income. Miscalculations and errors like this are unacceptable after having paid a premium for your software. It has cost me a lot of time to track this down. What do you intend to do about this? What kind of compensation do you intend to supply? Why should I trust your calculations in the future?

lchriste

Level 2

How do I correct this on my return???

rjs

Level 15

@edmarqu @lchriste

We asked the community moderators to look into this situation. They found that the question about living in certain foreign countries never had a default answer of Yes. However, the software developers recognize that the question caused confusion, and they plan to improve it for 2025.

lchriste

Level 2

I explicitly answered the question no for both my husband and myself. So maybe something else is going wrong?

Opus 17

Level 15

@lchriste wrote:

I explicitly answered the question no for both my husband and myself. So maybe something else is going wrong?

The only answer we will get from "up top" is the one posted above. If you want to discuss further, you would need to call customer support.

Sdd1956

Level 2

This exact same scenario happened to me. I can assure you that the software desktop version did default to yes, versus being blank. I certainly never selected yes, to this question As a result, I had to pay significantly more tax and I might have if I would’ve known this before filing. I would’ve re-classified some expenses from depreciation to regular expenses.

brags

Level 2

I also realized after e-filing my tax return that TT did not include any of my SS benefits as taxable income. The interview question about U.S. citizens living abroad defaulted to "YES". This error resulted in a $5,200 additional tax liability. Really not happy. I have been with Intuit since 1994 beginning with ProSeries and now TT desktop. Never have I seen such a huge software error. Then correcting it without notification to their customers.

I admit I misread the new question and surely should have questioned the lower tax liability. I assumed (I know) the it was part of OBBB and no tax on SS. Here's what I did, I hope I'm clear on what I experienced.

I originally left the "YES" box checked and don't remember if it showed up under the 2025 column on the income update page. After the software update, I changed the check box to "NO" the correct taxable amount was in the 2025 column and on the 1040. Going back and checking "YES" removed it from the 1040 but not in income update page. I'm so confused! Shouldn't be zero? I would have recognized that as an error before filing.

I intend to report additional interest and penalties to Intuit for reimbursement. A fair remedy if they pay, a lost customer if they do not!

beerisbread

Level 2

Turbotax, has made multiple errors over the years that I have been using it. . It seems like if you enter data that a later update would prevent it never goes back to fixes the prior entries. It's at the point that I track its calculations using an excel spreadsheet ( I just started SS in 2025. So, I accepted turbo tax's conclusion that SS was not taxable. I should have known it was wrong.)

A few years ago, I caught an error that Turbotax made on a prior year verified it with a spreadsheet than applied it to my prior tax years and found a mistake. ( I contacted them and instead of paying me the difference they told me to re -file my tax return. ) So, I would not hold your breath on them refunding anything other than a penalty.)

That, said the IRS contacted me about the amount i owed. I paid it and there was no penalty.