audit results

[kenoken7]

I was audited 4 times last year (files got deleted off computer....ugh) once by IRS and three times by Oregon, In all I paid about 13,000.... can I deduct from my taxes (I assume so) and where do I enter the amount on my turbotax ?

[DoninGA]

Federal income taxes owed and paid for a prior tax year are not deductible on a federal tax return.

State income taxes owed and paid for a prior tax year are deductible on a federal tax return in the year the taxes were paid.  State income income taxes paid are entered as an itemized deduction on Schedule A.

To enter state income taxes paid -

• Click on Federal Taxes (Personal using Home and Business)
  Click on Deductions and Credits
  Click on I'll choose what I work on (if shown)
  Scroll down to Estimates and Other Taxes Paid
  On Other Income Taxes, click on the start or update button

On the next screen scroll down to Other Income Taxes Paid in 2018

Or enter state taxes paid in the Search box located in the upper right of the program screen. Click on Jump to state taxes paid

[Anonymous]

what DoninGA posted is correct except that any penalties and interest paid to the state or for that matter to the IRS are not deductible.  

[Hal_Al]

The $10,000 limit on deducting state and local taxes (SALT), each year,  still applies even though the Oregon income taxes paid, was for  previous year(s).

[BMcCalpin]

Oregon is one of the few states that allows current year paid federal income tax to be deducted on the Oregon state return. However, you deduct the federal income tax paid on your Oregon return only in the year in which you actually pay the federal tax.

So in the case of an audit, when you pay additional federal income tax in a later year, that additional federal income tax gets deducted in Oregon in the year you paid it, not in the year of the original return.

As the state says in its instructions:

"Did you pay additional federal tax because you were audited or filed an amended return after the due date of the original return? If so, don't change the amount on your amended return. Claim the additional federal tax as a subtraction on your Oregon return in the year you paid the additional tax." (page 32 at https://www.oregon.gov/DOR/forms/FormsPubs/publication-or-17_101-431_2018.pdf). In fact, read the examples in the right-hand column - one of them specifically addresses audits.

To enter the additional amount, please proceed in the Oregon interview to the screen entitled "Here's the income that Oregon handles differently". Scroll down to the subheading "Misc adjustments". Click on Start for "Additional Federal Tax Paid for a Prior Year". Answer the questions, entering the amount of additional federal tax paid in the current year because of an audit in a prior year.

[hbl3973]

There is also the related question of out-of-pocket expenses associated with audits.  These are no longer allowed (technically suspended for several years) as Miscellaneous Itemized Deduction on federal and Oregon personal income tax returns.