topic Re: I refinanced and have two 1098 forms in Deductions & credits

I refinanced and have two 1098 forms

magenta272 — Thu, 06 Jun 2019 10:38:09 GMT

I have two 1098 forms, I don't know which is which and I don't know where to put them

If you have refinanced your home, it is normal that you h...

MinhT — Thu, 06 Jun 2019 10:38:11 GMT

If you have refinanced your home, it is normal that you have received two forms 1098, one from each loan.

You'll need to enter both 1098 forms on your tax return.

In TurboTax, to enter these forms 1098, please follow these steps:

Click on Federal Taxes
Click on Deductions & Credits
Under All Tax breaks, locate the section Your Home and click on Show more
Click Start next to Mortgage Interest, Refinancing, and Insurance (see screenshot 1)
Follow the interview and enter your first form 1098
Click Continue at the end of the interview
You will be brought back to the Mortgage deduction Summary page
Click on Add a Lender (see screenshot 2)
Follow the interview and enter your second form 1098.

Re: If you have refinanced your home, it is normal that you h...

Tomob — Tue, 28 Jan 2020 05:13:53 GMT

Should I fill in Real estate taxes paid twice?

Both 1098 has same amount on Real estate taxes paid...

Thank you.

Re: I refinanced and have two 1098 forms

jgackson — Wed, 29 Jan 2020 00:01:36 GMT

But two complications arise when entering two separate forms for a refi.

First, on the fed form the average balance is calculated as the SUM of the two average balances, as though the loans were both in effect the entire year, rather than as the AVERAGE of the two (or a prorated sum depending on the refi date). That's odd, but doesn't really cause a problem since each loan is over the $1m cap (the orig loan was Jun 2017, so both use the higher cap--no cash taken out).

Second, and more problematic, when the mistaken overall average carries over to the California form, the deduction limit is calculated using the mistaken average as denominator, so I get only about half the credit I should. Since the CA cap is the same as the Fed cap for these loans, the two should have the same deduction. But TT thinks otherwise.

The obvious override is simply to enter a pretend 1098 that combines the two loans and their interest payments, since that way the average is the orig loan's Jan 1 balance plus the refi loan's Dec 31 balance divided by two, and that then carries over correctly to the California form. Or I can just override the miscalculated figures individually.

I'm hoping that the handling of refis will get corrected before filing time.

Please suggest how to proceed?

Re: I refinanced and have two 1098 forms

CCap — Wed, 29 Jan 2020 14:36:40 GMT

I am having the same issue. TurboTax thinks I have 2 million in mortgages, when it’s really a single $500,000 debt that’s been refinanced/acquired multiple times.

Re: I refinanced and have two 1098 forms

jvskarthick — Thu, 30 Jan 2020 08:12:44 GMT

Am also having same issue, did refinance last year, so received two 1098 form from each lender (for the same property). when we enter two 1098 form both the loan "Outstanding mortgage principal" box 2 is getting added and goes more than 750K, which is causing issue. "mortgages total more than $750,000, your mortgage interest deduction is limited. " Actually my loan balance as of Jan-2019 is 500K". please provide the suggestion should we add all the other boxes from two forms other than box 2 and create one 1098 entry. Thanks JK.

Re: If you have refinanced your home, it is normal that you h...

mauisupgirl — Thu, 30 Jan 2020 20:39:56 GMT

This did not solve my problem either. It is adding the totals into a mortgage that is double what mine actually is. Please advise how to enter the amounts to show our actual mortgage after a refinance with having two 1098 forms. I can't find the answer anywhere.

Re: If you have refinanced your home, it is normal that you h...

MarilynG1 — Thu, 30 Jan 2020 22:01:44 GMT

No, don't enter the Real Estate Taxes paid twice, even though the amount shows on both 1098's.

The 1098's should have an Origination Date in Box 3 which should differentiate an Original Loan 1098 from a Refinanced Loan 1098,so the loan balances would not be added together. When entering your original loan 1098, DON'T indicate 'this loan has been refinanced' (even if it has).

When you enter your Refinanced Loan 1098, indicate YES this loan has been refinanced. You will then be able to indicate whether the entire loan amount was to 'buy, build or improve' your main home or you took CASH OUT in addition to refinancing the old loan (screenshot).

Re: If you have refinanced your home, it is normal that you h...

jgackson — Wed, 05 Feb 2020 22:25:28 GMT

Thing is, although TT shouldn't be adding the two average balances together, that's what it does. It's not a critical issue for Federal, since the user does the limit calculation outside TT (update 2/5: the Federal worksheet, which one gets by QuickZoom but not automatically, now can be persuaded to calculate the prorated average and limited interest deduction correctly, but that doesn't carry over to the corresponding California line), but for California TT does the calculation itself in a worksheet that feeds the (not yet final) Schedule CA, and TT does the calculation wrong. That needs to be corrected by Intuit.

Re: I refinanced and have two 1098 forms

DianeC958 — Mon, 03 Feb 2020 13:36:04 GMT

When you enter the refinanced mortgage information in Box 2 it is asking for the amount of the loan as of 01/01/2019. For the refinanced loan the amount is $0 because at the beginning of the year the loan did not have a balance.

Please review the amount for your refinanced loan and the program will work.

Link to Mortage Refinance Deductions

@jgackson

Re: I refinanced and have two 1098 forms

CCap — Mon, 03 Feb 2020 14:42:24 GMT

Thank you for your response. So, just to be clear, even though box 2 on the 1098 reads a certain about, I should just plug in 0?

on a similar note, if my mortgage was transferred to another lender during the year, do I also put $0 for box 2 on the new lender’s 1098?
I could’ve sworn box 2 said “balance as of 1/1/2019 OR balance at the time of acquisition” - is that not right?

thanks!!!

Re: I refinanced and have two 1098 forms

jgackson — Mon, 03 Feb 2020 17:59:07 GMT

The step-by-step help for Box 2 says "If you received a Form 1098 or similar statement from your lender, enter here the amount from box 2, 'outstanding mortgage principal.'", and that the worksheets will draw data directly from the 109 worksheet.

Entering an amount in the TT 1098 worksheet that's different from the bank's 1098 is another way to override the error--but the error is still there. Plus, it means the TT data won't match what's reported to the IRS. Moreover, the "solution" you suggest doesn't actually to the proration correctly, especially if the refi amount differs from the original mortgage's balance on the refi date (as happens, for example, if there are points or if closing costs are included in the refi amount). The amounts on the CA mtg worksheet come automatically from the 1098 amounts on the fed forms.

I can override the starting and ending balances on the California mtg int worksheet, but since the worksheet apparently ignores the "months" entry the result won't be prorated correctly either. Or I can do the calculation outside TT and enter the correctly prorated average directly as an override on the worksheet, which is what I've done until TT corrects its error. I note that correcting the error is going to require gathering more data in step-by-step, since for the moment s-b-s doesn't ask when a refinanced mortgage was paid off or the and so can't do the proration.

There are lots of us here in California who refinanced large mortgages in 2019, so this issue is definitely not confined to me.

Re: I refinanced and have two 1098 forms

CCap — Mon, 03 Feb 2020 18:12:35 GMT

My thoughts exactly. And it looks like this problem has been going on awhile. Will there be a fix before tax day?

Re: If you have refinanced your home, it is normal that you h...

KrisD15 — Tue, 04 Feb 2020 00:59:30 GMT

If the loan was moved to a different lender in 2019 and you have two 1098's to enter:

First, delete both 1098's. Do NOT try to edit.

Enter the older loan first, enter box 2 as it is reported,

THERE WILL BE A SCREEN ASKING "WAS THIS LOAN PAID OFF OR SOLD IN 2019?" CLICK "YES"

(this screen will not appear if you go back and edit)

Continue through the interview

Next, enter the second 1098

If box 2 is blank, enter zero, otherwise enter what is in box 2.

Continue through the interview questions. Do not select that it is a HELC.

Since you clicked that the first 1098 was paid off or refinanced with a different lender, the mortgage balances (box 2) will not be added together.

Re: If you have refinanced your home, it is normal that you h...

CCap — Tue, 04 Feb 2020 04:01:57 GMT

Thank you for the advice. However when I tried it, I did NOT get a box asking if this loan was paid off or sold during 2019. And this issue still occurred with the California form aggregating the loan debt.

Re: If you have refinanced your home, it is normal that you h...

KrisD15 — Tue, 04 Feb 2020 04:15:22 GMT

Did you delete the 1098 and start over fresh?

Re: If you have refinanced your home, it is normal that you h...

KrisD15 — Tue, 04 Feb 2020 05:04:32 GMT

Did you delete the 1098's and start over fresh?

That screen does not come up when editing, only when entering the 1098 initially.

Re: If you have refinanced your home, it is normal that you h...

mrhodes916 — Tue, 04 Feb 2020 19:13:03 GMT

I am having the same issue. I refinanced my original loan in 2019 and then the refinanced loan was sold to another lender so I have actually have three 1098 forms. I deleted all of them and started over with the 1098 for my original loan but unfortunately I'm not being prompted with the screen asking me if my loan was paid off or refinanced.

Re: If you have refinanced your home, it is normal that you h...

jgackson — Tue, 04 Feb 2020 20:06:47 GMT

I followed the instructions. The error persists. Please note that the error isn't in the Federal forms, since the deduction limit is calculated by the user outside TT and entered manually. Rather, the error is in the Ded Home Mort worksheet that feeds Schedule CA in the California return. Rather than have the user calculate the mortgage interest deduction limit, the worksheet draws data directly from the Federal 1098 worksheets and attempts to calculate the deduction limit. However, variously the relevant data don't transfer completely (for example, the "months" and "ending balance" entries necessary to calculate the prorated average, and so the worksheet is still adding the two total mortgage balances together in Part 2 line 2, using that as the denominator to calculate the limit, and so reducing the deduction (in my case) to about half what it should be.

The worksheet should transfer the starting and payoff balances for the original loan, and the starting and end-of-year balances for the refi, plus the date of the refi. It should then calculate the prorated average balance by multiplying each loan's average balance (start minus end divided by 2) by the fraction of the year that loan was active, and then adding those to parts together.

The simplest fix for the moment is to override the amount in Part 2 line 2 with a correctly calculated prorated average; then the rest of the California calculation proceeds properly. I very much hope that TT will fix the worksheet, or alternatively do the same as the Federal form and simply have the user calculate the limit.

Re: If you have refinanced your home, it is normal that you h...

jgackson — Tue, 04 Feb 2020 20:08:32 GMT

And, for the record, I did re-enter the 1098 data from scratch, and responded to queries and checkboxes as you instructed.