Turbotax got my Iowa non resident taxes wrong.

[sosipanet]

I filed my nonresident Iowa state tax and now Iowa says I owe them money. Turbotax had me file separtely instead or joint. Turbotax did not have me fill out form IA 126. A problem with Turbotax?

[JotikaT2]

TurboTax will ask you questions as you prepare your tax returns but it will not tell you how to file your tax return as far as filing status.  Is there a reason you filed separately in Iowa?  Did you work there and were the only one with income sourced to Iowa?

Depending upon your situation, Iowa typically is filed using the same status used on your federal return.  However, if only one of you has income from Iowa, then you could file separately.

Please see the link below for more information on the filing status that you could have used to prepare your tax return.

Iowa filing status

Form IA 126 would have been prepared if you have prepared your tax return to reflect both your resident state and your nonresident state information when you completed your return.  If it was not included, you should consider amending your Iowa return to correct the state return and report everything accurately.

IA Form 126 and instructions

Please see the link below for additional guidance on how to amend your state return.

Steps to amend a state tax return

[sosipanet]

Hi Jotika,

My federal form was filed jointly.  My Arkansas form was filed separately as recommended.  When turbotax did my Iowa and Ar state form they asked me very few questions.  Somehow Turbotax did not pick up my Iowa rent income and didn't do the IA 126 form showing the Iowa income.  Should I have done Iowa before AR when I was given a choice on which one to do next?  Stu

[AmyC]

The IA 126 is to target and tax only your IA income.

You have to prepare the nonresident return first to create a tax liability. Then the resident state can give you a credit. Prepared in the wrong order, you would be missing a credit and will want to file an amended return to get full credit.

If IA taxed more than just your IA income, or none at all, you need to amend IA.

If AR did not give you proper credit for tax paid to IA, you need to amend AR.

Don't amend until the original are settled. Make a copy of the originals before amending.

When you go through IA as a nonresident, it shows you each income and you select if it is IA source. Your rental income would show up on the screen after the wages. It says Rents, Royalties, Partnerships, etc. Enter your IA rental profit/ loss from sch E.

[sosipanet]

"TurboTax will ask you questions as you prepare your tax returns but it will not tell you how to file your tax return as far as filing status.  Is there a reason you filed separately in Iowa?  Did you work there and were the only one with income sourced to Iowa?"

I filed separately in Iowa because TurboTax recommended that I file separately.  After finding the error I tried both ways and separately did save me a little money.

I should have filed Iowa non-resident before Arkansas.  By doing so TurboTax did not pick up my non-resident income and complete form IA 126.  Why didn’t TurboTax catch my mistake of not filing Iowa first?

I talked to the Iowa IRS and they said I should file an amended Iowa return.  I started to do that with TurboTax and found it will cost me $45 to do it.  I will also have to file an amended Arkansas return because I will be getting more money back.  Will that cost me another $45?

I looks like it will be cheaper to pay the $128 Iowa tax bill then to go to all the trouble filing amended returns.  Will TurboTax wave the $45 charge because of their mistake?

[sosipanet]

I filed separately in Iowa because TurboTax recommended that I file separately. After finding the error I tried both ways and separately did save me a little money.

I should have filed Iowa non-resident before Arkansas. By doing so TurboTax did not pick up my non-resident income and complete form IA 126. Why didn’t TurboTax catch my mistake of not filing Iowa first?

I talked to the Iowa IRS and they said I should file an amended Iowa return. I started to do that with TurboTax and found it will cost me $45 to do it. I will also have to file an amended Arkansas return because I will be getting more money back. Will that cost me another $45?

I looks like it will be cheaper to pay the $128 Iowa tax bill then to go to all the trouble filing amended returns. Will TurboTax wave the $45 charge because of their mistake?

[AmyC]

There is not a fee to amend your return. It should not be costing you any more. Now you know, do the non-resident first.

Once your original return is accepted and the finances are settled, you can file an amended return. 

• Save a copy of the original return before doing an amended return. See: 
  • how to file an amended return.
  • I need to amend my state return.
  • Can I e-file my amended state return?
  • Can I e-file my 1040X to amend my return?
• Pay additional tax. Taxpayers who will owe more tax should file Form 1040-X and pay the tax as soon as possible to avoid penalties and interest. They should consider using IRS Direct Pay to pay any tax directly from a checking or savings account for free.
• Use separate forms if amending more than one tax year.
  • Each year on its own form
  • Each year in its own envelope
• Track amended return status online. Taxpayers can track the status of their amended tax return in English and Spanish using Where’s My Amended Return?  Amended returns take up to 16 weeks to process and up to three weeks from the date of mailing to show up in the system.