TurboTax Online not subtracting PTET credit from Virginia 760C

[7t9r743V]

There is a two year old thread about this exact bug in the "business and farm" forum:
https://ttlc.intuit.com/community/business-taxes/discussion/re-turbo-tax-is-not-considering-virginia...

I'm creating a new thread in the "state tax filing" forum in hopes of getting some traction with the right team. The other thread does a great job of summarizing the issue, so I'll copy some of the text from there:

For Virginia state tax filers, TurboTax Online is not considering the Virginia PTET Credit when calculating underpayment on Form 760C. Line 1 of Virginia Form 760C specifically states: "2025 Income Tax Liability After Spouse Tax Adjustment and Tax Credits" (emphasis mine).
https://www.tax.virginia.gov/sites/default/files/taxforms/individual-income-tax/2025/760c-2025.pdf

Additionally, Virginia's published instructions for Form 760C state: "Line 1 - Start with the tax liability reported on your income tax return. Subtract the Spouse Tax Adjustment and tax credits and enter the result here."
https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-760c-instructions.pdf

I have a Virginia VK-1 form with a reported Pass-Through Entity Elective Tax Payment Credit. TurboTax Online is correctly applying the credit when calculating tax owed on my Form 760, but incorrectly does not account for it when calculating underpayment penalties on Form 760C. The result is that TurboTax is erroneously calculating an underpayment penalty of over $900 in my specific situation, when in reality it should be $0. Per the explanation above, this is a very clear bug which has been reported in multiple TurboTax Community threads over the past two years, and it still hasn't been fixed.

Other threads reporting this exact issue with no satisfactory resolutions provided:
- https://ttlc.intuit.com/community/business-taxes/discussion/re-turbo-tax-is-not-considering-virginia...
- https://ttlc.intuit.com/community/state-taxes/discussion/incorrect-virginia-underpayment-penalty-for...
- https://ttlc.intuit.com/community/state-taxes/discussion/re-where-to-enter-pass-through-entity-elect...

Questions for the TurboTax team:
1. Does TurboTax acknowledge this issue as a bug, and if so, what is the timeline for a fix?
2. Is there any workaround available for TurboTax Online Premium users?
3. Has this issue been fixed in TurboTax Desktop?

[PatriciaV]

It would be helpful to have a TurboTax ".tax2025" file that is experiencing this issue for further testing.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, please follow these instructions: 

In TurboTax Online, open your return, go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools.
2. A window will pop up which says Tools Center.
3. On this screen, select Share my file with Agent.
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number.
5. You may wish to snap a screenshot to post instead of the actual number.
6. Reply to this thread with your Token number (including the dash) and tag (@) the Expert requesting the token from you.
7. Please include any States that are part of your return - this is VERY important.

If you are using TurboTax for Desktop, go to Online in the top menu, then choose "Send Tax File to Agent."

We will then be able to see the same experience you are having and possibly forward to our tech team for investigation.

@7t9r743V 

[7t9r743V]

@PatriciaV Thanks for looking into this for me. The diagnostic token is 1328991. My state is Virginia.

[7t9r743V]

Here's some additional context, using my specific numbers for this tax year, which may be helpful to better understand the issue. Relevant screenshots are attached from the TurboTax Online print preview feature for my VA return.

I have income from both W2 employment and pass through entity (LLC) business income which resulted in a net tax of $30,420 owed to Virginia, which TurboTax has correctly specified in VA Form 760 - Box 18. I have a PTET credit of $17,662 on my Virginia VK-1 form (due to electing Virginia's PTET option and making the estimated quarterly payments as required on the business side for the business income), which TurboTax has correctly reflected in VA Form 760 - Box 25.

My W2 withholding ($12,878) plus the PTET credit ($17,662) for tax paid on the business side results in a total tax payment of $30,540, which is correctly shown in VA Form 760 - Box 26. This means I slightly overpaid by $120, which TurboTax correctly reflects in VA Form 760 - Box 28. This value is what my VA refund should be, were it not for the erroneous penalty issue detailed below.

The problem arises when TurboTax populates VA Form 760C (not to be confused with VA Form 760) to calculate potential underpayment penalties. VA Form 760C - Box 1 clearly states that tax credits should be subtracted out from the tax liability. Intuitively this makes sense because the taxes pertaining to the PTET credit were already paid on the business side, not the individual side (that's the whole point of taking the PTET election). However, for the VA Form 760C - Box 1 value, TurboTax appears to be using the VA Form 760 - Box 18 value ($30,420 in my case) without subtracting out the VA Form 760 - Box 25 PTET credit value ($17,662 in my case). The correct value for VA Form 760C - Box 1 in my case should be $30,420 - $17,662 = $12,758. This error in VA Form 760C - Box 1 massively throws off the rest of the calculations in VA Form 760C, ultimately resulting in an incorrectly calculated penalty of $923 in my case, when in reality it is $0.

Compounding the issue is that there doesn't seem to be any mechanism in TurboTax Online for me to manually override the incorrect VA Form 760C - Box 1 value to use the correct value.

Please let me know if this info is helpful, or if I can provide any additional details or clarity.

[IsabellaG]

We have forwarded your issue to our Investigations Team, and will update you as soon as possible.