IRS calculates taxable Social Security benefits differently from TurboTax

[TurtleToo]

I just got a letter from the IRS stating that my taxable Social Security benefits are $8K higher than what TurboTax calculated for 2022.  There is a BUG in the TT software and I will pay penalty and interest for TT mistake.  So I used the TT worksheet and found out the IRS is correct.  Then I used the worksheet for 2023 and guess what, TT calculated the taxable portion of SS incorrectly lower again.  I'll get another letter from the IRS and will pay more penalties and interest.  What is my recourse here.  Obviously this is affecting millions of TT users.

[xmasbaby0]

TurboTax provides do-it-yourself tax software.  TurboTax guarantees the calculations done by its software.   The information entered into that software is data entered by you, the user.   TurboTax cannot and does not check that information against any outside sources, so TT cannot know if you entered your information completely or correctly.   It is up to you to enter all of your information correctly and completely, and to check your tax return before you file it.  If you forget to enter some income, or enter it incorrectly, enter it in the wrong place, etc. then you may end up owing additional tax to the IRS and/or state.  TurboTax does not pay the additional tax you owe.   If TurboTax’s calculations were incorrect, and you owe penalties and/or interest, then TT will pay the penalties and interest.  The tax due is always owed by you, and must be paid by you.

If you need to enter a claim for the accuracy guarantee:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/intuit-account-billing/submit-claim-turb...

[TomD8]

"Obviously this is affecting millions of TT users."

But if that were so, this forum would (presumably) have been flooded with similar questions, which it was not.

[TurtleToo]

I just got the IRS letter yesterday.  Wait until millions get the same letter and react to the TuboTax software bug.

[DoninGA]

@TurtleToo 

If this was really an issue, it would have generated tens of thousands of complaints on this forum and others.  Since it has not then the reply by @xmasbaby0 is accurate.

Note - I receive SS benefits and the taxable portion of my benefits from tax years 2010 through 2023 using TurboTax has always been correct.

[xmasbaby0]

We will be waiting for news on that.   It would be an interesting development, since the IRS inspects the software before it is made available and the IRS must approve of the software and the way the calculations are done.

[SteamTrain]

Unless you filed really early in the season (i.e. anytime in January) there was unlikely to be a software error for that calculation.

As a wild guess...The one thing I can think of that could have been missed...or mis-entered by you into the software,.....that would be your tax-exempt bond interest.  Those $$ do figure into the calculation.

Check that the total of all your box 8$$ (minus box 13) in all 1099-INT, plus all box 12 in all your 1099-DIV forms ...make sure that total adds up to what you see in line 2a of your form 1040.  If line 2a on your 1040 is significantly lower than your manually-totaled amount, then it's most likely you didn't enter all of your tax exempt $$ when you originally filed.

(I've heard that there can be $$ from forms K-1 too with tax exempt $$, but I'm not familiar with that form)

[TurtleToo]

I have filled in the SS Benefits Worksheet for both 2022 and 2023.  My results of taxable SS benefits comes in much higher than TT calculates (if I use "total income" on line 3 of the worksheet) and is close to what the IRS claims the taxable amount should be.  If, however, I use AGI on line 3 then my manual calculations using the worksheet are much closer to what TT calculates.  I'd love to tell the IRS that TT is correct and the IRS is wrong.  Any thoughts on using total income vs AGI on line 3 of the worksheet?

[fanfare]

BUT, the worksheet Line 3 calls for total income Line 9, not AGI line 11.

@TurtleToo 

[VolvoGirl]

Are you using the actual Turbo Tax Social Security worksheet in your return?  To see the Social Security Benefits Calculation Worksheet  in Turbo Tax Online version you would have to save your return with all the worksheets to your computer.   Or if you are using the Desktop CD/Download Software you can switch to Forms Mode (click Forms in the upper right) and click on SS in the list on the left side.

Then are you using the IRS Pub. 915 on Social Security.  There is a blank worksheet on page 16

https://www.irs.gov/pub/irs-pdf/p915.pdf

[SteamTrain]

Sheesh...it's getting difficult to determine which SS worksheet each person is referring to.

The IRS SS worksheet?  or the TTX SS worksheet.  The values in the various lines can be different

e.g.

a)  The IRS SS worksheet , line 3 does not include the 1040 line 2a value....they add that in line 4 of the IRS SS Worksheet.

b)  The TTX SS worksheet includes the value of line 2a of the form 1040 in the line 3 total.

________

The TTX SS worksheet also includes or subtracts some other values not immediately apparent when using the IRS SS worksheet.   

[VolvoGirl]

Oh you need IRS pub 915 for each year.  The 1040 lines may have changed each year. 

2022 915
https://www.irs.gov/pub/irs-prior/p915--2022.pdf 

2020 915

https://www.irs.gov/pub/irs-prior/p915--2020.pdf 

[rjs]

@TurtleToo  Did the IRS change anything else on your tax return besides the taxable Social Security amount, Form 1040 line 6b? Any change in other income items, or to line 6a, would change the taxable amount of Social Security.

[TurtleToo]

Yes the IRS found some other income I did not declare which would change the taxable SS benefits.  How can I use online TT to modify my total income and see what TT recalculates as taxable SS benefits?

[rjs]

TurboTax Online is not a good vehicle for this sort of thing. You don't want to modify the tax return that you actually filed. Any changes in TurboTax Online are saved automatically and permanently. There is no backout or undo, and no way to exit without saving.

The best approach would be to buy a copy of the CD/Download TurboTax software and install it on your Windows or Mac computer. You could then download the .tax2023 data file for your tax return from TurboTax Online, open it in the CD/Download software, and save a copy with a different name. Then add the income that was omitted and see what happens to the taxable Social Security. You would be able to look at the Social Security Benefits Worksheet in forms mode, or create a PDF of it.

If you filed a state tax return, you have to install the state software before you can open the .tax2023 file. So you would want the Deluxe or higher software, which includes one state.

You could try calling TurboTax support on Monday, explain the circumstances, and see if they will give you a free download of the software.