The IRS disallowed $1,540 on form 8959 line 24. rolled into my 1040SR line 25C as additional withholding. The IRS zeroed this amount and reduced my refund. Why?

[billschwamle]

Is Turbo Tax in error or is the IRS wrong?

[dmertz]

The result seems to suggest that you entered into box 6 of TurboTax's W-2 form(s) a different amount than is shown in box 6 of the Form(s) W-2 provided by your employer(s).  Perhaps you omitted a decimal point.

The only other possibility would seem to be if you paper-filed your tax return and the IRS person transcribing your tax return made a transcription error.

[rjs]

. . . Or you could have made a mistake entering an amount in box 5 of a W-2. Check your entries for box 5 and box 6 of each W-2. Look for missing or transposed digits, extra digits, misplaced decimal point, etc. Compare the actual W-2 from each employer to what's in TurboTax.

Form 8959 line 24 is just a total. We can't tell anything from that. If you can't find an entry error, we will have to dig into the details of the form.

Is this for 2020 or 2021? Did you e-file your tax return or file by mail?

Do you have any less common situations that would affect your Medicare tax, such as unreported tips (Form 4137), 1099-MISC or 1099-NEC income that should have been reported on a W-2 (Form 8919), or RRTA compensation in W-2 box 14?

[billschwamle]

Line 24 is a total, but I checked the W2 and all the numbers are correct in Turbotax totaling to $1,540 overpaid to Medicare withholding based on Medicare wages.   I will check with Audit Defense on Monday to see if they can find out why the IRS disagrees with 8959 in Turbotax.   I did e-file 3/9/22, but had to send a hardcopy to the IRS in August when they challenged the withholdings in April and lost my faxed response.

[billschwamle]

This is for 2021 taxes.  I didn't have any of those uncommon situations.  I had $53 in state refund and $5 in 1099-MISC income, but nothing that would negate the Medicare overpayment.

[billschwamle]

I checked the W2 and all the numbers are correct in Turbotax totaling to $1,540 overpaid to Medicare withholding based on Medicare wages.   I will check with Audit Defense on Monday to see if they can find out why the IRS disagrees with 8959 in Turbotax.   I did e-file 3/9/22, but had to send a hardcopy to the IRS in August when they challenged the withholdings in April and lost my faxed response.  The e-file copy and the hardcopy all match and the number on line 24 of 8959 is exactly what the IRS added to my total tax due in 2021.

[NCperson]

@billschwamle  how did your employer over withhold Medicare?  it's simply 1.45% of Box 5 on the W-2 or stated otherwise, Box 6 divided by Box 5 on the W-2 should be 1.45%.  do you have a W-2 where that is not true and how did it occur? maybe that is the key to understanding what the IRS is doing.

[rjs · Accepted solution]

@NCperson  Medicare tax withholding is not "simply 1.45% of Box 5." Each employer must also withhold 0.9% Additional Medicare Tax on Medicare wages over $200,000. The total Additional Medicare Tax withheld is calculated in Part V of Form 8959 and credited as additional withholding on Form 1040 line 25c. It's that additional withholding from Form 8959 that the IRS disallowed. But it's not clear that there was any overwithholding. The disallowance might be an IRS mistake. The OP, billschwamle, has apparently purchased Audit Defense, so hopefully they will straighten it out.

[billschwamle]

I have opened a case with Turbotax Audit Defense.  In discussing with the agent who has reviewed my tax information, we agree that the IRS seems to have ignored that Medicare overpayment that appears to be valid as additional withholding, so they are challenging the reduction in my refund.