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charitable deduction carryover error in North Carolina

Forum|Forum|4 years ago
February 14, 2022
51 replies
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I believe there is an error in the North Carolina Software program. Like I suppose all states, if you donate to charity an amount over your AGI, the excess must be carried over to the next five years (actually, NC limits it to 60% of AGI, I think; but it's immaterial to my finding). Like the huge majority of filers, I came nowhere near giving to charity an amount that large. But, on the D-400 NC Standard/Itemized Deductions Worksheet, on Line 3 under Charitable Contributions, there is a number; it happens to be the exact amount I DID give to various charities, in 2020; but it's certainly not near my AGI. So I don't think it should be there at all. I think I can zero it out, thereby increasing my tax; but better than sending in an erroneous return.

Best answer by SteamTrain

@DoninGA Its critical that this one be passed up the line for fast action (Before E-filing NC does start up).

It has nothing to do with the transmission problems, but an actual critical calculation error for NC.

I spent late night confirming it, and this morning too testing different situations.

_____________________________________

1) Short story: Transferring in last year's 2020 tax file includes ALL charitable deductions form 2020 into a 2021 NC Charitable Carryover page....all $$ already used last year. And none of those $$ are carryover amounts.

2) Longer story: I created a 2020 Fed&NC tax file (Premier: 2020.48.50.115). Single age 55 With $100,000 W-2 & AGI.

Itemized deductions ( Fed 21,300) with 13,500 mixed Charitable donations. Those same Charitable donations were used in the 2020 NC itemized deductions. No carryover since the 13500 was far below the 60%,50%,30%,etc AGI limits)

3) Transferring that file to 2021 taxes (Premier: 2021.47.17.75) just takes those used charity donations and imports them into the Carryover column of the 2021 Deductions worksheet (picture Below). (not sure what happens if there was an actual carryover).

4) If an NC resident has enough 2021 deductions to itemize for 2021, then those improper carryover $$ are added in for an improper large total charitable deduction (second picture below. Similar 100k AGI with Itemized deductions).

5) One can workaround by entering $0 for those carryover amounts in teh NC interview (both Online & Desktop) or the form itself in desktop....but cannot just blank-out the values, or the $$ refill with the improper values. Those who realize the $$ are all wrong may fix them...but 10's of thousands will just let it go assuming TTX knows what it's doing.

6) Other: If the 2021 NC tax file doesn't have enough new deductions to itemize, the carryover $$ are ignored...so those folks may be safe for the moment. IF the person used the NC Std Ded in 2020, all their 2020 Charitable donations (if entered in 2020) still transfer to the Carryover column for 2021 taxes.

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Diagnostic files if they can be used:

2020 Fed + NC: 923675

2021 Fed + NC: 923683

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SteamTrain

Level 15

Best track is to Call Customer Support and get a Ticket issued to get that fixed.....they can check it out in detail, and get a diagnostic file too Sounds like it could be a big one.

What is the TurboTax phone number? (intuit.com)

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

B

beach004Author

Level 2

As suggested, I called them. As I expected, minimal help. I think the lady said she filed a report for me; but I have no confidence she understood what I was reporting, and I doubt if anything will happen. TT is in the business of selling, not responding. Maybe other folks will file a North Carolina D-400, and see the same thing.

SteamTrainAnswer

Level 15

@DoninGA Its critical that this one be passed up the line for fast action (Before E-filing NC does start up).

It has nothing to do with the transmission problems, but an actual critical calculation error for NC.

I spent late night confirming it, and this morning too testing different situations.

_____________________________________

1) Short story: Transferring in last year's 2020 tax file includes ALL charitable deductions form 2020 into a 2021 NC Charitable Carryover page....all $$ already used last year. And none of those $$ are carryover amounts.

2) Longer story: I created a 2020 Fed&NC tax file (Premier: 2020.48.50.115). Single age 55 With $100,000 W-2 & AGI.

Itemized deductions ( Fed 21,300) with 13,500 mixed Charitable donations. Those same Charitable donations were used in the 2020 NC itemized deductions. No carryover since the 13500 was far below the 60%,50%,30%,etc AGI limits)

3) Transferring that file to 2021 taxes (Premier: 2021.47.17.75) just takes those used charity donations and imports them into the Carryover column of the 2021 Deductions worksheet (picture Below). (not sure what happens if there was an actual carryover).

4) If an NC resident has enough 2021 deductions to itemize for 2021, then those improper carryover $$ are added in for an improper large total charitable deduction (second picture below. Similar 100k AGI with Itemized deductions).

5) One can workaround by entering $0 for those carryover amounts in teh NC interview (both Online & Desktop) or the form itself in desktop....but cannot just blank-out the values, or the $$ refill with the improper values. Those who realize the $$ are all wrong may fix them...but 10's of thousands will just let it go assuming TTX knows what it's doing.

6) Other: If the 2021 NC tax file doesn't have enough new deductions to itemize, the carryover $$ are ignored...so those folks may be safe for the moment. IF the person used the NC Std Ded in 2020, all their 2020 Charitable donations (if entered in 2020) still transfer to the Carryover column for 2021 taxes.

___________________________________

Diagnostic files if they can be used:

2020 Fed + NC: 923675

2021 Fed + NC: 923683

__________________________________

_________________________

______________________________________________________________________________________

___________________________________________________________________________________

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

D

DougieLeMon

Level 2

I noticed an issue when I was getting a rather large refund, when I normally have to pay a few hundred $. It looked a little fishy, and when I looked through the PDF of the state taxes, sure enough that carryover was there for the full amount of our charitable donations in 2020. After manually going through the State tax process in TurboTax, I could zero out the values and am now set to get a MUCH smaller return (like $45 instead of $1200)

SteamTrain

Level 15

Yeah, TTX needs to work fast to fix this one.

Those NC taxpayers who decided to mail-file already, who itemized their deductions and didn't catch the screwup to zero it out, are going to get an unpleasant surprise letter from the NCDOR. Don't know if the NCDOR will issue refunds anyhow, and bill the taxpayers later....or just hold everything up.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

DoninGA

Level 15

@SteamTrain Tried posting a Private Message to you but your User ID does not come up. Did you turn off messaging?

Anyway, finally got an acknowledgment from the Moderators today, 02/17,at 12:04PM that they are investigating.

They also wanted it to be known that they appreciate your support.

J

Jeff in NC

Level 2

I am seeing the same thing and can confirm your observations.

D

Darla66

Level 2

I can confirm that I have had the exact same issue re the erroneous "carryover from prior year" in the charitable contribution section on NC itemized deduction worksheet. What a pain! I will await software update as opposed to manual fix.

B

billnorthraleigh

Level 2

This is what I saw today from the screen in TurboTax where it asks to fix the rejected NC return:

Description of error:
There is an issue in the North Carolina Charitable Contributions in the state tax return.

What needs to be done:
There is an issue with this topic in the product. This product update will be available on and after February 25, 2022. Please update your software on or after 02/25/2022 (for web products this will happen automatically) and follow the steps below before re-transmitting. 1. Go to your tax return and navigate to your state return. 2. Answer all questions as before until the screen "Charitable Contribution carryovers from prior Years" - If you don't see this screen and reach review, go to step 6. 3. On this screen "Charitable Contribution carryovers from prior years", review all the amounts. 4. Click the `Learn More' link under the `IMPORTANT' section to assist you in updating these amounts if necessary. 5. Check the box at the bottom of the screen to confirm the contribution amounts are correct. 6. Follow the screens and re-submit this return electronically. For ProSeries customers: On the North Carolina return please go to the `North Carolina Standard/Itemized Deduction worksheet', scroll down to the `Charitable Contributions Smart Worksheet' . Review all the amounts for accuracy and correctness. Check the box at the bottom of the smart worksheet to confirm the contribution amounts are correct. Re-submit this return electronically. You may also print it and mail it to the appropriate taxing authority via U.S. Mail. We apologize for any inconvenience this may have caused.

SteamTrain

Level 15

They seemed to have issued the update last night, and it appeared to have mostly work for me the way they described, but maybe they are going to do another tonight, so will check again tomorrow morning.

______________________

1) For those that had an existing NC tax formset, the vast majority of them will still need to zero-out any carryover $$ showing.

2) For those who never even started the NC tax forms yet, the carryover sheet comes in with zero's on it now.

or

3) For those who are uncomfortable with all that...they can completely delete the NC tax return formset, then re-start NC from scratch, and the correct amounts transfer in (i.e. zeros for 999-out-of-1000 folks). BUT, don't attempt to delete the NC forms if you've already paid for filing them...or filed and rejected, since I'm not sure what happens to your billing in that situation.

4) But in any case, you will have a checkbox to check to confirm you looked at it and confirm the values are now correct...after you viewed them, and if necessary, "fixed" them in one way or another.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

S

Slayer

Level 2

It transmitted today...we'll see if it is accepted by N. Carolina...waiting...

P

Pokey54

Level 2

OH My Goodness. I just went through two calls with Turbo Tax Representatives. They could not give me any definite answers and had not heard of a situation like mine. I filed my Federal and my NC Tax return electronically on 2/22/2022. Even though, according to their website I found out after I filed, NC is not accepting returns until 2/28/2022. Also, I was able to file before any updates on the 2/24/2022, even though many people I found out later or most people were not able to file their NC state tax returns until at least 2/24/2022. But, for me, I had no issues whatsoever. I attribute this to the fact that I didn't have children or other covid credits I could take and maybe that is why I was able to file it. Yes, it does state it is filed, but it is pending. So, here is the issue, yesterday, 3 days after I filed, I went back into the Turbotax software and there was an update. Suddenly, after the update I owed less money. The money was exactly the amount of use tax I paid into North Carolina from the year before, in 2020. Both representatives at both levels weren't sure what happened, but would look into it. I did further research after realizing the difference that I see from when I filed to now for what I owe seems to be coming from the fact that I now have itemized deductions instead of the standard deduction. So, I started looking at that and I wondered why in the world was I getting a wonderful carry over from my 2020 charitable contributions. When I read this post as well as everyone elses posts, I realized, Hey......there is no way I gave 60% or more of my income to charities in 2020. I am generous, but I still must eat and live. So......I went in and followed everyone's suggestions and zeroed it out. I am now back to the number that I owed NC before the update. Since I already submitted my tax return for NC, and it was right at the time I submitted it, which for me meant, I am getting the standard deduction with NC State and not the itemized deduction, I am assuming that whatever was originally submitted, even though, not yet accepted, will be the correct amounts, (not itemized) making me pay less, because of the carry over that is wrong, but the standard deduction that I originally filed. So, I am back to paying more. But, that is better than having to deal with a wrong state tax return. Thank goodness, I printed out what I filed as it changed with the update on the 25th. Had I not, I would have had nothing to compare it too. Thank you all! I mean it. I think a lot of people are going to be upset. I am glad, I will not be one of them. It does bother me that I spoke with two representatives and they didn't know why it happened. That tells me that they were not informed. That is a problem as they have until Monday to fix it and those that submitted it, after the 2/23/2022 update, they have a problem. Even though my update happened on 2/25/2022, the update said it was 2/23/2022 update and that is the update that changed my standard deduction to a itemized deduction in my case.

SteamTrain

Level 15

@Pokey54

Good to see you figured it out, and were able to get your tax forms back to the way they were supposed to be.

We still don't know what NC will do once they stare processing tax files.

They may see you filed before the updates could be initiated and reject it even if it is really OK as-is. Or, like you said, since it is using a Std Ded and not really a problem, they could just accept it and move on.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

P

Pokey54

Level 2

My return was accepted around 5AM this morning. Since I owe NC money, I am waiting to see how much really comes out of my bank account. When I submitted it, it was based off the standard deduction, which was right. Three days after I filed NC State an update occurred and the erroneous carryover amounts were inserted causing my amount to pay being lowered. I fixed it, as everyone said here in these posts to a zero amount. Hoping what was originally transmitted on the 22nd went through where I only had the standard deduction and not the itemized deduction. Regardless, whatever comes out of my bank account will tell me for sure. I assume that if NC accepted my return and I owe money and I put in my banking info that they will draft it out within this next day or so?

R

rhondaverret1

Level 2

I also have this error in my taxes - thankfully I caught it before I filed. I'm wondering why it hasn't been fixed yet as other people have reported/found it also.

N

NattySoko36

Level 2

Did you ever get an update. Mine did the same thing. I fixed it and im still waiting to be accepted or rejected

S

Slayer

Level 2

Me too, unfortunately still waiting...I plan to post here when I hear anything more on this matter...all the best!

N

NattySoko36

Level 2

Thank you. I'm just sitting here wondering. I have never had any issue like this before so I'm a little frustrated.

D

Derby6033

Level 2

How can I zero this out?

SteamTrain

Level 15

@Derby6033

You go into the NC interview.

There's a Charitable Contribution Carryover section in the NC Income area.

Or, start thru the NC interview from start to finish again.

___________________

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

D

Dottie1956

Level 2

I field in February and NC rejected my filing for the charitable contribution carryover form. I should not have any carryover. I deducted $820 in 2020. TurboTax pulled that amount that I have already deducted and showed it as carryover. I think they outsourced programming to a foreign country that does not pay US taxes. Any US programmer should have known better. Customer Service suggested I file and said that hey will fix it next year. Can TurboTax say TAXFRAUD?