Michigan Public Safety Officer Pension is being taxed - GLITCH??

[WILLNDTW]

Turbotax state program is taxing my husband's pension as a public safety officer.  New law from 2023 allows 100% deduction of public safety officer pension.  When clicking "pension is from public safety officer" it sometimes reverts back to "no" if going backwards.  But it is still taxing the pension even when clicked "yes".  Need this fixed in the program.   Have tried several times with agents at turbotax. Case #[number removed].

[BillM223]

Are you saying that on Form 4884, that line 27 does not include the amount of the pension (see Form 4884)?

Are you also saying that the pension is considered taxable on your federal return (line 5b on the 1040)?

Don't be too concerned about the yes/no answers changing. Some questions are so important that every time you enter the screen with the question, TurboTax in essence asks you to reconfirm the answer.

[WILLNDTW]

Hello BillM223,

From my understanding, based on new Michigan law, when selecting “yes” for public safety officer, the program should be exempting pension income from the state tax portion. However, it is not exempting it.  Only when choosing “military pension” does it exempt it (but it is not a military pension it is a qualified government/public pension).  Federal taxes are not affected by this law, and are taxed.

Also, it’s really confusing when it doesn’t save the “yes” for public officer, and you have to change it every time you go back.  That is going to mess up a lot of people’s taxes that don’t catch that (my opinion).

I spoke to two agents already about this issue, and they both agreed that there was an issue here (for both of these points).  But I don’t see it resolved.

Thanks to advise if I’m missing something here, or when this issue will be fixed.  If I didn’t catch the fact that it taxed this pension income, I would probably have filed this way (and lost about $1000).  

[BillM223]

Yes, public safety officer pensions are exempted up to $61,518 if filing single or married filing separate, or $123,036 if filing married joint. Which one are you?

On form 4884 (if you can see it), is line 6a checked? And on line 6b, is the box checked?

Finally, can you see "Worksheet 3.2: Retirement and Pension Benefits Subtraction for Section C of Form 4884"? Please tell me each of the lines and the value on each line. If so, this could show why the pension was disallowed in Michigan.

[WILLNDTW]

We are married, filling jointly, and way below the exemption threshold.  

On Form 4884, the line of 6a is not checked, nor is line 6b checked.   Even though in the interview method, I indicated that this pension was from a public safety officer pension.  Both of these boxes should be checked according to my situation.    It also will not allow me to manually check it in the form.  In fact, it won’t allow me to enter anything manually in here (unless I just don’t know how to do that).  

For the worksheet 3.2, it is totally blank.  There are no values there.  And it won’t let me enter anything in here either.  I can see now why the program is taxing my husband’s pension income, and it should not be.  Again, unless I’m doing something wrong, will this be fixed?  This appears to be a major issue here, and no one at TurboTax seems to know about it. 

[BillM223]

I am going to have to ask some funny questions, because I have found that the software is placing a lot of limits on this deduction. For example, if you were born after 1952, the pension deduction doesn't work at all, no matter what other information you entered.

So:

1. Is your spouse deceased? Sorry for suggesting that, but the Michigan instructions have lots of rules here.

2. What was the birth year of your spouse?

3. When you saw "When clicking "pension is from public safety officer"" , and "Even though in the interview method, I indicated that this pension was from a public safety officer pension. " was this in the 1099-R interview or in the Michigan state interview? 

4. Did you see this?"

[WILLNDTW]

Greetings, will answer your silly questions here (LOL):

1. Is your spouse deceased? Sorry for suggesting that, but the Michigan instructions have lots of rules here. - No, he is alive and well.

2. What was the birth year of your spouse? -   1967

3. When you saw "When clicking "pension is from public safety officer"" , and "Even though in the interview method, I indicated that this pension was from a public safety officer pension. " was this in the 1099-R interview or in the Michigan state interview?   -  This was in the 1099-R step by step interview portion of the program

4. Did you see this -  I had not seen that !  So, maybe it will take until Feb 13 for the software to be up to date?   

FYI, it does not matter if the pension recipient is deceased, or how old they are.  If they are public service officer (police in this case), they are exempt from all pension income at state level regardless (starting in 2023 tax year according to the new law).   Thanks to advise if you believe the program will be adjusted by Feb 13, and if I should just wait until then.   I was unaware of the below message.  Thank you.

[jk407]

I am running into the same issue.  I spent almost 3 hours on the phone with Turbotax trying to figure this out but the software doesn't seem to be updated to allow for this.  They had me switch from the online turbotax to the desktop download version so that I could work in the individual forms.  It seems as if the worksheet for the pension as well as the Schedule 1 is not carrying over information correctly and the 6a box on the 4884 is not being considered.  In my opinion, after choosing the type of pension plan (G - from a government or public source (qualifies for exclusion based on age)", there needs to be a further question asking if you received benefits from this plan from service as a public safety retiree to trigger the box 6a being checked, in order to populate the Retirement and Pension Benefits Subtraction on line 27 of Schedule 1. 

Turbotax needs to fix this ASAP!  The state of Michigan website says all 2023 forms have been updated to reflect the change in the law, and they advise people should not wait to file their taxes in anticipation of the Feb. 13 effective date.  They can't legally process the returns with a form 4884 until that date, but Turbotax should be up to date with these changes because the state of Michigan already is.  According to Turbotax's Tax Form Availability, the 4884 as well as the Schedule 1 are up to date and available.  But obviously they are not working correctly, at least for public safety officer pensions.

I was told I would have to manually file my state taxes because Turbotax is not doing it correctly, which is ridiculous since the reason I use Turbotax is to complete and file all my taxes, with confidence that they are done correctly.

[WILLNDTW]

Glad to see I'm not the only one having this problem.  Turbotax tax experts:  Can you advise when this issue will be fixed in the software?   We are still getting taxed on our Pensions as Public service officers.  Thanks to let the community know when this glitch is fixed and we can file our taxes !  Thank you.

[WILLNDTW]

Hello Turbo tax experts:    Can you please advise when this glitch will be fixed?  What is the status?  I would like to file my taxes today.  Still surprised that no one there seems to know anything about this issue, and that it has not been resolved.    Thank you for your response with resolution status. 

[jk407]

@WILLNDTW 

I was able to do some trickery to get the forms to (kinda) work.

I had to go to my personal information and change my date of birth to 1950, even though that is no where close to what it really is (I was born in the 70's).  This allowed me to go through the rest of the Michigan retirement/pension income steps, and the questions for Public Safety Officer were there, which then checked box 6a on the forms (Schedule 1 and 4884).  These are the 3 screens after entering the information for the pension (where you choose type "G"): 

screen 1:

Screen 1

Screen 2:

Screen 2

Screen 3:

Screen 3

After completing these screens I went back and corrected my age, and the forms stayed correct.  I was using the desktop software version so I was able to look at the individual forms as I went along.  It seems to work as well with the online version.

Feel free to send me a private message if this isn't clear and I can try to help out.

Hopefully Turbotax fixes the glitches so we don't have to resort to trickery to get the forms to populate correctly.

PS-I was able to e-file my state and it was accepted yesterday.

[WILLNDTW]

This is awesome.  Thanks !   Never would have thought to do that, but I'm going to give it a try later and see if it works.  It is a shame that we pay for the program, and it doesn't work correctly.  I understand making updates to the software, etc., but I spent hours on the phone with Turbo tax, and no one was able to fix this issue.  Thanks again !

[BillM223]

We have a process by which we reproduce the problem, design it, fix it, code it, test it, and then regression test to make sure we didn't break anything else.

This issue is in the system, can't say when it will be done.

@WILLNDTW 

[WILLNDTW]

Just a follow up to the "back door" method to get this to work from my colleague below.  I was able to change my birth year and force the form to work for the Michigan state pension exclusion.  However, because I'm married, it is carrying over my spouse's pension as non-taxable also (even though I did not check the public safety officer box for him).  Really need this fixed in the system as I don't want to file and have issues later.  Thanks turbo tax to review and respond as soon as possible.  Thank you.

[WILLNDTW]

OK, but meanwhile, I can't file my Michigan taxes because of this turbo tax glitch.  And I have a refund due, which I need.  This doesn't sound like an acceptable answer.  How do you compensate filers who have paid for this program, found a glitch for you, and then have no time frame on when the glitch will be fixed?  Thank you, and feel free to reach out to me via private message if more appropriate.