Entering multiple 1098s due to a refinance is incorrectly triggering the $750,000 principal limit on home loan interest deductions.

[amo4555]

I don't agree with modifying either the box 1 or box 2 of 1098s. These forms are sent by lenders and why would I have to modify these forms and trigger an IRS audit? TurboTax has a problem in their software and they should fix this instead of suggesting these "Shady" workarounds?

I don't agree with some "Expert" saying you are backed by Intuit's 100% audit guarantee? First of all come audit time and Intuit will back out saying our guarantee does not cover "falsified" information. I am sure the small print has language covering this and I am sure there must be language that will say these "Expert" opinions are not an official position of Intuit.

And secondly this may be a tactic used by Intuit into making us buy an Audit Defense service.

This is highway robbery and and such practices need to be reported to the appropriate Federal and State agencies.

[Anayaltr]

I agree. I filed using the suggested workaround and submitted my return electronically a over a month ago and have yet to receive a refund. When I check the status it says "Processing". I can't help but think that it's due to Turbo Tax's 1098 issue. I am extremely disappointed and won't use it again.

[gnel612]

If I enter as just one 1098 - which lender would I show the 1098 for? The original lender or the new lender?

[TigerHe]

Why TT can't fix this issue? It is so easy to fix in the software. You already asked for paid off date in the software.

Is it just because customer will sue TT for this mistake so you don't want to recognize this as a bug/mistake ? it's so ridiculous and I'll not use TT next year.

[LeeKevVA]

I tried combining them and it actually said we are better off taking the standard deduction - which is nonsense.  When we refi'd, we took out some cash.  We took out a refi mortgage just over the 750k limit.  I entered the amount we took out in cash for the refi loan screens (less than 10% of the refi'd mortgage) but it is allowing us to deduct only about 60% of our interest.  None of the advice being given is helping out.  Entering $1 for the originating mortgage principle ($0 is not an option) on the loan we paid off shaves off about $3k off of our taxes.  Any tips?  This is just nuts.

[Michael128]

Doesn't work.  When setting Box 2 to 0, the error message "Outstanding mortgage principal must have a value." appears.

[JotikaT2]

You have a couple of options if it is not pulling in correctly.  You can either try entering $1 as the balance so the program pull the calculation through and bypasses the error. 

Your other option is to combine the 1098 forms if they show the same balance of the mortgage.  Please see the following link for more guidance on how to do this in TurboTax.

Entering multiple 1098s when loan is refinanced

The IRS looks at your overall totals and ensures they match the total amounts as reported on your 1098 Forms.  The only time they might question it is if the amounts reported on your income tax return do not match the totals from all of your 1098 Forms.

I recommend retaining your 1098 forms with your income tax returns.  Should the taxing agencies request further proof, you will be able to provide them with the tax forms as evidence of your deduction.

@Michael128

[rprastein]

Hi, KingRebecca.

I'm dealing with this, too, for the last 5 days.  I have the desktop version of TurboTax, and you CAN edit the average balances.  To modify the value of a calculated field, you have to right-click in the field and select "Override", and then you can type in the correct number.  If for some reason you change your mind, right click again and select "Cancel override".  Or you can hit ctrl-D, which toggles between overriding and using the default value.

Fixing the average balances works for my California return (which is where I first realized that yes, I have this problem, too).  However, the Federal return is still not letting me deduct my points.  I had a refinance with cash out and points, followed by an immediate sale of the new loan.  It appears that there are (at least) two bugs in this section of the tax deductions:

1.  When there are multiple loans during a single tax year, including at least one refinance where both loans are not outstanding at the same time, the software is adding their average balances rather than averaging them with a weighted average based on the number of months that each loan is outstanding.  The work-around of multiplying the calculated average by the number of months the loan was outstanding and then dividing by 12, works.  I feel for the online users who don't have this option.

2.  When there is a refinance with cash out and points, despite answering all of the interview questions and all of the questions on the 1098 worksheet to indicate that all of the cash out was used to buy, build, or substantially improve the home, that information is being ignored and the loan is being treated as a home equity loan and points are being treated as not deductible.  I'm still looking for a work-around (or a worksheet question I've missed) for this one.

[sbachawat1979]

Hi- What should be entered in the mortgage lender name if we have 2 different lenders (due to refinance) if we are asking to combine and report together.?  Also Box 2 outstanding mortgage principal should come from the current lender? How will IRS verify this when we have separate 1098's? Thanks for your response.

[AmyC]

Multiple 1098 entries addresses some concerns. Remember, the worksheets are not so terribly important versus the actual tax form going to federal and state. See the real form at  About Schedule A (Form 1040 or 1040-SR), Itemized Deductions

@rprastein Regarding the points, if you know they are deductible, just enter them as such. The tax form does not have separate entries for each form. It is one line for interest, another for points. Tell the program what it wants to hear, not a cash out or not a refinance, etc.

@sbachawat1979 Yes, combine and use the current lender for balance. The IRS computer runs through your social security number and 1098 forms and sees if your numbers are less than or equal to the total given. The IRS will double check the mortgage balances to see if yours is limited. The IRS only sees the total on sch A so this is the normal process. 

[rprastein]

Thanks, Amy.

Telling the program what it wants to hear is not so straightforward when answering the way you thought it wanted gives you the wrong answer and a bunch of people online are complaining that the software is doing it wrong.  When the program gets it right on the first try, the user doesn't have to know much of anything.  When it gets it wrong, the user has to recheck assumptions about definitions of the terms used and the relevant tax rules, and then through trial and error figure out what happens to the calculations when questions are answered differently. 

Anyway, after more TT Community research and googling, and a couple of passes through the interview with the worksheets displaying below, I figured out what worksheets I needed to pay attention to so that I could double-check that the right values were in them.  Several more iterations, and I'm confident that everything is correct.

All that's left now is for my husband and me to sign the returns and mail them in.

Rebeccah

[AmyC]

I am glad you are done. You are absolutely right, I know what it should do; but I work here.  I am glad you were able to get the final numbers right on the forms. Have a great year!

[jaychow38]

I did mortgage refinance on June 2020. Mean I switch from Lender A to Lender B. Thus I received 1098 form from each of the lenders. Initially, I thought I just need to insert 2 lenders with 2 1098 forms separately in TurboTax.

However, when I started to enter info for Lender A, I saw a link of "What if I have multiple 1098s related to refinance in 2020?". TurboTax suggest me to Grab a calculator and add the Mortgage interest Received (Box 1) amount from each form and enter the total into TurboTax as Box 1 Mortgage interest.  From this instruction, seems like Turbotax want me to combine the info from both 1098s and only enter 1 time. 

However, after I finished combine all the number from both 1098s. I saw a button "Add a Lender". Now i am not sure should I add a new lender since I have enter both info from two 1098s form just now. Pls advice. Thx!

[Cynthiad66]

No.  Just use the current lenders name.  Make sure that Box two only contains the loan balance of the new loan.

[jaychow38]

Thanks a lot for your kind reply. Unfortunately, I have submitted my filing before I receive this reply. 

1) I only put one 1098 enter in TurboTax.

2) But I put the name of my old lender. 

3) The Box 2 amount is the outstanding amount from the old lender. 

May I know if this will affect the overall tax calculation and cause an audit/penalty later? Can I just ignore it or I have to file an amendment? Thx.