2022 Disaster Casualty loss disallowed by IRS due to deduction conflict

[auraleeauralee]

Using Turbotax Desktop 2022 my filed 1040 claimed the standard deduction plus a federal disaster casualty loss on schedule A. I just got an IRS CP2000 notice because of the itemized vs standard contradiction. Result is IRS is disallowing my casualty loss deduction. Apparently the trigger is that it sees both itemized (Schedule A) for the single Casualty loss plus the standard deduction. I simply answered all the question when preparing my 2022 1040 and the program created this situation. Is there documented information which allows this deduction this way? Was this an error in the 2022 program? Is there recourse through TT? Is there a specific contact number to discuss this issue?

[dmertz]

Without having done an override in the CD/download version of TurboTax, it seems implausible that the amounts shown on 2022 Form 1040 line 12 would be the sum of the deduction for the casualty loss shown on Schedule A and the standard deduction.  TurboTax puts on line 12 either the standard deduction or the total itemized deductions from Schedule A.

[jwbEA2012 · Accepted solution]

Yes it is possible to increase the standard deduction, on SCH-A, due to a qualified disaster. Publication 547 lists this and the steps to do so. Form 4684, line 15, is also involved and the sequence of steps is listed on page 16.

https://www.irs.gov/pub/irs-prior/p547--2022.pdf

Increased standard deduction reporting.  If
you have a net qualified disaster loss on Form
4684, line 15, and you aren’t itemizing your deductions,
you can claim an increased standard
deduction using Schedule A

[dmertz]

Thanks for the reference.  So the deduction is determined on Schedule A as described in IRS Pub 547 by including the standard deduction on Schedule A and reporting the total from Schedule A on Form 1040 line 12.  If that's what was done, perhaps the IRS made an error or the IRS for some reason believes that your disaster casualty loss did not qualify.

[auraleeauralee]

SOLVED. IRS mistake. I confirmed all my inputs and my return entries. Read Pub & Form Instructions for proof. I typed up a reply package to the CP2000, but then I called IRS to confirm my data at 7AM Friday (immediate pickup!!!) The rep agreed with my explanation and dug deep. She said that following a previous IRS error on this same return (missed "QCD" on my IRA amount) a human reviewed the return and coded my hurricane casualty deduction as a "Gambling Debt."  (?)  Sadly, the CP2000 provided no useful info about the issue. It just said my taxable income was higher. The rep agreed to fix this problem and said I would get a confirmation letter in a month. So standard deduction plus disaster casualty loss is O.K. added together. TTax got it right again. I'm now 2 for 2 for 2022.

Thank you for the replies and guidance. I appreciate the support.