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

[edmarqu]

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.

[rjs]

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]

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]

How do I correct this on my return???

[rjs]

@lchriste 

The IRS calls any error in a tax return a calculation error. It doesn't necessarily mean that the calculations were wrong. Most of the time the error is caused by incorrect or missing input. The TurboTax calculations were correct for the input that was provided.

When the IRS says that Social Security income was calculated incorrectly, it's usually because they corrected some other income on the tax return. Did they change anything else besides your Social Security income? A change in any other income will change the amount of your Social Security that is taxable. One other possibility is an incorrect answer to the question about whether you or your spouse live in certain foreign countries. This question is new this year, and some people have misread it and answered incorrectly. See the discussion about this new question at the beginning of this thread, above your post.

TurboTax will reimburse you for penalties or interest that you had to pay because of an error in the TurboTax calculations. You can submit a claim under the Accurate Calculation Guarantee.

You probably do not have to correct your tax return. If the IRS reduced your refund they have already made the correction. You do not have to do anything unless the IRS notice tells you to correct it.

[lchriste]

Mac OS Home & Business--Please answer specific question.

[lchriste]

I would not have checked a box indicating we live outside the USA.  If interviews or. forms are that confusing, TT needs to revise.  The SS amount on our return is correct and unrevised--only the taxable amount is wrong (miscalculated).  You are really suggesting that I not have a record of an accurate tax return?  Please tell me how to make the correction in my records (not for resubmission to the IRS).  TT has a history of confusing interviews.  We nearly made yet another expensive error regarding long term care insurance which we have encountered in the past (along with many other users). We found this again just before submission.  Please take responsibility and make things crystal clear in the interviews.  I cannot trust your returns.

[VolvoGirl]

There is a new question this year that people have been missing or answering wrong.   And you need to answer it for both spouses if you are married.

[VolvoGirl]

Go back through the Social Security questions and see it the foreign screen comes up.  Or switch to forms mode and check if it was marked yes for foreign.   

In Home & Business go to Personal then Income Social Security.  

[lchriste]

Both boxes are checked "NO"

[lchriste]

No other income has been changed.