Alabama Schedule D: Not Eligible for Electronic Filing - More than 500 items

[au87]

I am trying to e-file my Alabama state return and am getting this message:

Not Eligible for Electronic Filing

Reason: Returns with more than 500 items on Schedule D are not eligible for electronic filing.

These rules are set by the Alabama Department of Revenue.

The good news is you can still print your Alabama return and file it by mail.

I have searched the internet for hours and have an inquiry in with the Alabama Department of Revenue, but I cannot find any source for this rule. Can someone provide me with the Alabama Department of Revenue source text which states returns with more than 500 items on Schedule D are not eligible for e-file?

[BillM223]

The way e-filing works is this: The tax file that TurboTax generates after all your input and its calculations has to be converted to XML, a tagged data format (as opposed to PDF, which is a print/presentation format).

XML instances are governed by something called a schema. The schema dictates what tags (pieces of information) are allowed, in the order they are allowed, and how many instances they are allowed (among other things).

So when your XML file arrives in Alabama for processing, it gets "parsed" to see if it matches the requirements of the schema. If it doesn't (for example, it has more Schedule D transactions than are allowed by the Schema), then the return is rejected.

TurboTax knows what the schema is for Alabama and the other states, therefore it can build a valid ML file to e-file with. In this case, either your XML file got to Alabama and was rejected, or during the XML building process in the e-file process in TurboTax rejected it because it knew that it would fail Alabama's parsing.

So if you really want to know why 500 transactions, you need to contact the group in the AL DOR that handles "Individual MeF (Forms 40 and 40NR)". The name and contact information for the Alabama Individual MeF Coordinator is on this Alabama webpage.

You may or may not get an answer - his job is to deal with software vendors who create this XML, not the general public, plus he might be a tad busy right now handling any issue that have arising in tax season....but this is almost certainly the reason for the 500 limit.

[au87]

Thanks for the detailed response Bill. I actually contacted the AL DOR and they said the limit is 2,000 items, not 500. It appears TurboTax has the wrong limit set within the software. Can this be fixed?

[BillM223]

"It appears TurboTax has the wrong limit set within the software. Can this be fixed?"

Certainly not at this point. This software is tested back in Nov-Dec - certainly before the state opens for e-filing. I can't imagine that TurboTax would even think of making such a change in the last week of tax season.

So what can you do? Well, given that the number of Sch D transactions to be reported will probably skyrocket as cryptocurrency becomes more popular, and given the fact that TurboTax is interested in capturing cryptocurrency customers (see the current suite of commercials right now on television), you may be able to find someone in the Sales/Marketing area who would push this update through for next year (and start checking all the other states, too).

For all I know (since I do not work in the MeF area), TurboTax already has projects to update the schemas every year, but with the truly awful 2020 filing season (where Congress and the states kept "moving the goalposts", i.e., changing the tax law on nearly a daily basis during tax season), things might have slipped.

Good luck.

[au87]

Thanks Bill. While I understand it cannot be fixed this year, I would hope it would certainly be fixed by next year. Thanks again for the prompt responses.