They way Turbotax is calculating my Wisconsin Additional Dependent Care Credit for 2024 is wrong. Your software is not adding a tax credit to my state return like it should because I have a dependent care FSA.
I have one child with a total of $10k qualified expenses and a dependent care FSA benefit of $5k. You correctly calculate my federal credit at $0 because the FSA amount exceeds the federal limit of $3k.
However, the statute for Wisconsin in 2024 changed to allow expenses up to $10k for a single dependent. Turbotax is not recalculating my WI-2441 correctly and saying I also get $0 credit from the state which is plainly wrong. My state additional credit is actually $1000 (20% of the remaining $5k of qualified expenses after you account for the higher limits).
The mistake is easy to prove. If I change Box 10 on my W-2 to be $2995 for my FSA, Turbotax shows I get a $1 credit on the federal return and then you correctly calculate my Additional Wisconsin credit with the higher limits in 2024. But if I now change Box 10 to be $3000, the Wisconsin credit is completely removed. Having a $0 federal credit is causing you to not calculate the Wisconsin additional amount correctly.
Not impressed.
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1272753.
Wisconsin is the only state for the return.
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I've looked over your return and also reviewed the instructions to the WI-2441. Per the instructions, Form WI-2441 is heavily dependent on federal Form 2441.
The reason your WI credit is calculating as zero is because your income is not flowing to the WI-2441 on lines 7 and 8. These lines come from the Federal Form 2441, Part II.
You received tax-free dependent care benefits in excess of work related expenses of $3,000. As you mentioned, you would not qualify for the federal credit in this case. Because you don't qualify for the federal credit, Part II of your federal Form 2441 is blank.
The instructions to the WI Form WI-2441 (page 3) require that your earned income amounts be pulled from Part II of the Federal Form 2441. The TurboTax programming is written based on the instructions to the form. Since your Part II is blank, your income is not transferring to the WI form. Although the WI statute was updated to reflect higher work related expenses for the child care credit, your credit is being limited based on the function of the federal Form 2441 and the instructions to the WI-2441.
Are you implying that Turbotax is doing the correct thing? Because it is absolutely not.
If you read the Wisconsin statute change, it explicitly states to recalculate form 2441 using the higher limits:
71.07(9g)(b) 2. For taxable years beginning after December 31, 2023, and subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of those taxes, an amount equal to 100 percent of the federal child and dependent care tax credit that the claimant may claim on his or her federal income tax return for the taxable year to which the claim under this subsection relates using the expense limitation under par. (c) 5. rather than the expense limitation under 26 USC 21 (c).
TurboTax is completing the WI Form W1-2441 based on the state provided instructions to the form. The state will need to update the instructions to agree with the statute.
The amounts TO BE ENTERED on lines 4 and 5. (i.e. the amounts that would be entered into those lines if the form was completed)
It does not say to blindly take the blank values from an incomplete Form 2441 and coalesce that blank/incomplete value into a zero. That is nonsense.
The instructions for lines 7 and 8 are clear that my actual earned income should to be filled in. My earned income is not zero. Turbotax should be following the instructions for lines 4 and 5 to get the correct earned income values. "Flowing" a blank value from an incomplete form into $0 is lazy and wrong.
You have a software bug. I will use different software that does not have this defect. Sorry to all the Wisconsin parents who will miss out on a tax credit due to Turbotax.
barry_in_wi
Do you have the CD/download version of TurboTax (often called desktop)?
If so, I believe that I can give you a workaround.
On your federal 2441, on lines 4 and 5, do an override (right mouse click on the field to open the Override). Put your earned income on line 4 and your spouse's earned income on line 5 (or vice versa - we sanitize the return so well I can't easily tell which one of you is the primary taxpayer).
Once you do this, then the WI-2441 should populate lines 7 and 8, which will allow TurboTax to calculate the credit for Wisconsin.
Sadly, doing this override may cancel the Tax Accuracy Guarantee, but it's there if you want to try it.
Thanks for that suggestion, it does seem like it would work around the current problem. I have only used the online version, so I'll have to decide if paying Intuit for flawed software is worth it.
And I do appreciate the irony that a manual override to improve the accuracy of the software will remove its own accuracy guarantee.
Hopefully someone at Intuit reads this and discovers how the software mishandles this specific scenario when dependent care benefits make you ineligible for federal credits, but you are still eligible for state credits. I tried calling support, but of course no one will talk to me unless I pay for live support first.
I appreciate your sense of humor about this.
I have reported this internally, so we don't have to wait for someone to notice this. But, of course, that's no guarantee of whether or not Development can get to it this tax season.
Having written tax software (for another company), I have an appreciation for the volume of work that developers have to do in a relatively short time. We can't make any prediction of when this might be addressed.
If you decide to get the CD/download product, come back and ask if you have any issues.
Is this issue planned to be fixed by the next tax season? If not I will not use turbo tax and hope other Wisconsin residents realize they are losing out on substantial tax credits (potentially thousands of dollars) by using turbo tax.
I went back in and it appears that this issue is now fixed in the online version. My state refund is showing the correct dependent care credit amount after the FSA exclusion.
I appreciate that they fixed this before April. Too bad for Intuit that I already filed with a different product that got it correct the first time. You lost a 20 year customer. But keep buying those super bowl ads!
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