Why did turbo tax calculate the wrong social security taxable benefit amount for 2018?

[Dan93]

I agree with Bill in that, in my case, TT noted the correct amount of $300.00 CC on line 10b of my form 1040-SR.  However, there is no amount listed on line 10a but the program did place $300.00 on line 6 of the SS Benefits Worksheet that caused the taxable social security amount to be reduced, in my case, by $255.00. I feel that this is "double dipping" the charitable contribution amount that is allowed by the IRS.  Bottom line is that my Adjusted Gross Income noted on line 11 of the 1040-SR return was reduced by $555.00 instead of the allowable $300.00. 

[Dan93]

My reply should have stated that I disagree with Bill's reply and agree with dmertz on his reply.

[dmertz]

The problem is that most people affected by this TurboTax behavior will be perfectly happy with it since it lowers their perceived tax liability.  Without a significant number of people reporting this as unexpected behavior, TurboTax Product Quality has no incentive to change it.  Those people will be less happy if they start receiving notices from the IRS telling them that they have underreported their income.

[Dan93]

I was able to use the "override" feature in TT on the social security benefits worksheet to delete the $300 on line 6 so the taxable amount matched the IRS program.  I was worried that TT would not let me efile but it did as everything processed and my tax return has been received by the IRS for processing.  I feel better that only $300 was properly deducted from my adjusted gross income. 

[BillM223]

"Schedule A charitable deductions never affected the calculation of the taxable portion of  Social Security benefits, so why should the deduction on Form 1040 line 10b do so? "

But the $300 is not a charitable contribution on this return. The $300 above the line deduction is only when the taxpayer is taking the Standard Deduction, so the charitable deduction is not taken on this return.

As for this being a bug, it seems to me that someone at TurboTax deliberately made this change - it certainly didn't happen by accident. I would find it would quite believable that TurboTax has information that supported this change.

However, of course, I do not have access to such decisions in TurboTax. I suggest that you place this question in the Lounge to see what else other Champions think and what the Mods say.

I would appreciate it.

@dmertz May I ask you a favor? When you make a reply that I should see, would you tag me (@ BillM223) in the reply? The tools that we use make it unlikely that I would see your reply (which I always want to see) unless I am tagged. Thanks.

@Dan93 "I feel that this is "double dipping" the charitable contribution amount that is allowed by the IRS." As I noted above, this cannot be a case of double dipping. You can take this above the line deduction only when you are taking the Standard Deduction, so you are not taking this as a contribution deduction as well.

[dmertz]

@BillM223  

Well, the version of the instructions for Form 1040 published one week ago now shows that the amount from Form 1040 line 10b is to be included on line 6 of the Social Security Benefits Worksheet.  The fact that this deduction is in 62(a)(22) does cause it to be an above-the-line deduction like the others.  It seems to be a loophole in the tax code that the lawmakers failed to address.  So, TurboTax is behaving in accordance with the updated instructions for this worksheet.

Still, I believe that it's inequitable.  Someone age 65 of over who has made $300 in charitable contributions and has $14,051 of other Schedule A deductions such that TurboTax uses the itemized deductions has $255 more of their Social Security income taxed and a $255 higher AGI affecting other calculations than does someone with only $14,050 of other Schedule A deductions and therefore causes TurboTax to use the standard deduction with $300 on Form 1040 line 10b.  Few if any in this situation will figure out that they can lower their tax by overriding TurboTax's choice of using itemized deductions and use the standard deduction instead under these circumstances.  Excluding the line 10b amount from line 6 of the Social Security benefits worksheet would restore equity.  I guess it would take a technical correction by the lawmakers to restore equity.

I'll bet that I could manufacture an enhancement to the scenario above to increase the inequity substantially, factoring in things like a Retirement Savings Contributions Credit which depend on AGI, generating a tax liability difference of well over $600.  I can imagine the questions:  "Why did my tax liability increase by more than $600 when I entered an additional $1 of itemized deductions?"

[Dan93]

My return for this year used the standard deduction as I did not have enough deductions to file long form so I did not have a schedule A for my federal return.  Just a simple return 1040-SR with no attached schedules.   The issue is that I had a Charitable contribution of $300 that was correctly noted on line 10b and line 10c.  10c is the total of 10a and 10b.  However, I did not have any adjustments to my income from schedule 1, line 22.  However, the $300 also showed up on Social Security Benefits Worksheet on line 6.  I cannot find anywhere in my search that a cash charitable contribution would qualify as an adjustment to income that would be recorded on Schedule 1 (Form 1040).  I would assume the IRS would be looking for this form to be attached to my return noting the adjustment to income.   I think the issue is how line 10 of the 1040-SR is structured.   Both 10a and 10b are adjustments to income; however, I  think they are a stand alone line adjustments to income since line 10b entry is a Charitable contribution adjustment to income and 10a entry is the total adjustments to income from Schedule 1.   I would really like to hear from someone from TT on this issue that would support their calculations.  As I am new to this forum, I do not know how to post this issue in the "Lounge" as I have not heard of it.

[dmertz]

The fact that this deduction is listed in section 62(a) of the tax code requires the IRS to treat it the same as any of the above-the-line-deductions on Schedule 1.  I overlooked this in my original assessment.  I agree that it's inequitable and counterintuitive.  I believe that Congress simply made a mistake by putting this deduction in section 62(a) of the tax code and should have made it stand alone so that the deduction presently on line 10b and the Schedule A deduction would produce the same result if other Schedule A deductions equaled the standard deduction.  But it is what it is and the IRS and TurboTax must conform.

I suspect that the IRS considered putting it on Schedule 1, but they instead chose to put it directly on Form 1040 near line 12 only because of its dependence on the use of the standard deduction.

As I mentioned, the IRS instructions for the Social Security Benefits Worksheet have very recently been updated to require the line 10b amount to appear on line 6 of the worksheet, so that would be TurboTax's reason for having implemented it this way.

[Dan93]

@BillM223

I stand corrected as I have looked at the updated instructions.  I agree that it is inequitable.  Oh well, it only cost me $36 to take it out of my return.  It will be interesting to see if next year they allow it to remain as the amount increases to $600 for those filing jointly.  I will not make the same mistake next year!