I have credit carryover amount for my child adoption costs, but TurboTax is including this in my total refund on my CA tax. Is this correct?

[joeruhl]

The max tax credit allowed for California is $2500, which TurboTax states it will use this year. However, my total tax refund for CA is higher than expected and seems to be including the carryover amount.

[DaveF1006]

Yes, you can use up to $2500 for the child tax credit this year and this will include carryover amounts you weren't able to use previously.  This additional credit will generate a bigger tax refund, which is not a bad thing.

[joeruhl]

Ok, my concern was more on what TurboTax was showing me as my CA state refund, which was really high due to the carryover. I understand that for CA I'm limited to just $2500 per year, but then why does TurboTax show my total CA tax refund to be about the same value as my total carry over, which was in the tens of thousands?

Definitely appreciate you taking the time to answer my question, Dave. To be honest I didn't think anyone would answer so I ended up submitting my taxes and hoping TurboTax did it right. If I end up getting that full tax refund amount this year and no complaints from the government then that's cool. Otherwise I'll have to address it later if the government wants that money back, and I'll have to complain to TurboTax somehow for getting my CA tax wrong.

[DFANOUS]

@joeruhl @DaveF1006 I am having the exact same issue. If you look at your Form 540, Line 43 should be no more than $2500. However, the software is pushing the $2500 allowed PLUS your carryover on that line which is inflating your refund. I have tried working through it with several Live Experts but no luck yet. On hold right now and am hoping to get this resolved.

[joeruhl]

@DFANOUS Really appreciate you replying and doing this. Just an update from my end, I got my state tax refund and it looks like the correct amount. So it seems promising that the state tax was filled in correct enough or at least interpreted correctly by the state. Still there seems to be some lingering problem within TurboTax on carry-over adoption credit since I cannot find the corresponding state tax refund amount in my full tax return. My state tax return shows I should get the full adoption credit carry-over as a refund. Like you said, on Form 540 line 43 seems to be filled incorrectly by the software.

[DFANOUS]

@joeruhl glad to hear the return filed without any hiccups. My concern is if anyone audits the return at some point and I'm stuck with a liability plus interest. Did I understand correctly that your Form 540 Line 43 is higher than $2500? I figured CA FTB would have some algorithm to automatically reject the return if something like that happened since the instructions for that form specifically say it cannot be higher than $2500. The expert is going to call me back tomorrow morning as we couldn't solve it today. The only way I was able to get Line 43 to be $2500 is to put I was only eligible for $2500 credit and no carryover for next year (which is not correct). That messed up some other areas on my return in Schedule P. Stay tuned...hopefully I'll have better news tomorrow!

[joeruhl]

@DFANOUS  That's right, my Form 540 line 43 shows the adoption carryover amount including the $2500 for the year. It doesn't split out the $2500 on that form at all, but on the Schedule P it does show the credit used this year and the credit carryover correctly.

[DFANOUS]

@joeruhl got it, same here. My Line 43 shows way more than $2500. Included $2500 and my carryover. I also see the split out in Sched P. Unfortunately, the CA FTB instructions say you can’t have anything more than $2500 on Line 43 so I’m hoping I can figure this all out tomorrow. Will keep you posted. 

[DFANOUS]

@joeruhl ok, after talking to several TT folks, here is where I landed. The expert I spoke to said he reached out to someone who swears the software is calculating correctly and pointed to their 100% Accurate Calculations Guarantee. However, in discussing with the expert, we both agreed something was funky with the software for the reasons you and I have been discussing...most notably Form 540 Line 43 cannot be higher than $2500. The only way I was able to get it correct on Form 540 was to delete my CA state return and start over. I entered the total adoption costs and then said I don't have any carryover. This got Form 540 Line 43 to show $2500, however, in Schedule P it shows I don't have any carryover. Ironically, in the SMART WORKSHEETS for my CA Return, the math is correct.

I asked the expert what would happen if I hadn't caught this and filed with Line 43 showing the $2500 plus my carryover amount and the IRS came after me. He pointed back to the guarantee and said TT would cover any penalty or interest. After reading the Terms of Service , that is true but it appears that TT will not cover the extra refund you received. So, if your refund as submitted was $10K but after correcting Line 43 to $2500 would be $4K, you would still be responsible for the $6K delta back to the IRS. Hope that makes sense.

[joeruhl]

@DFANOUS Thanks for the update! It makes sense that TT would only cover the fees/penalties and not the extra refund. Good to know that the 100% accuracy guarantee will help me in that case something goes wrong. I definitely did not get the full carryover amount in my actual CA refund but rather an amount that makes more sense, so I think I'm good to go. I just hope that TT hears our complaint about this and fixes it for next year.