Level 1

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I refinanced and have two 1098 forms

Forum|Forum|7 years ago
June 6, 2019
12 replies
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I have two 1098 forms, I don't know which is which and I don't know where to put them

TurboTax Premier Online

Best answer by MinhT1

If you have refinanced your home, it is normal that you have received two forms 1098, one from each loan.

You'll need to enter both 1098 forms on your tax return.

In TurboTax, to enter these forms 1098, please follow these steps:

Click on Federal Taxes
Click on Deductions & Credits
Under All Tax breaks, locate the section Your Home and click on Show more
Click Start next to Mortgage Interest, Refinancing, and Insurance (see screenshot 1)
Follow the interview and enter your first form 1098
Click Continue at the end of the interview
You will be brought back to the Mortgage deduction Summary page
Click on Add a Lender (see screenshot 2)
Follow the interview and enter your second form 1098.

M

MinhT1Answer

Level 15

If you have refinanced your home, it is normal that you have received two forms 1098, one from each loan.

You'll need to enter both 1098 forms on your tax return.

In TurboTax, to enter these forms 1098, please follow these steps:

Click on Federal Taxes
Click on Deductions & Credits
Under All Tax breaks, locate the section Your Home and click on Show more
Click Start next to Mortgage Interest, Refinancing, and Insurance (see screenshot 1)
Follow the interview and enter your first form 1098
Click Continue at the end of the interview
You will be brought back to the Mortgage deduction Summary page
Click on Add a Lender (see screenshot 2)
Follow the interview and enter your second form 1098.

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T

Tomob

Level 2

Should I fill in Real estate taxes paid twice?

Both 1098 has same amount on Real estate taxes paid...

Thank you.

MarilynG

Level 15

No, don't enter the Real Estate Taxes paid twice, even though the amount shows on both 1098's.

The 1098's should have an Origination Date in Box 3 which should differentiate an Original Loan 1098 from a Refinanced Loan 1098,so the loan balances would not be added together. When entering your original loan 1098, DON'T indicate 'this loan has been refinanced' (even if it has).

When you enter your Refinanced Loan 1098, indicate YES this loan has been refinanced. You will then be able to indicate whether the entire loan amount was to 'buy, build or improve' your main home or you took CASH OUT in addition to refinancing the old loan (screenshot).

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jgackson

Level 3

But two complications arise when entering two separate forms for a refi.

First, on the fed form the average balance is calculated as the SUM of the two average balances, as though the loans were both in effect the entire year, rather than as the AVERAGE of the two (or a prorated sum depending on the refi date). That's odd, but doesn't really cause a problem since each loan is over the $1m cap (the orig loan was Jun 2017, so both use the higher cap--no cash taken out).

Second, and more problematic, when the mistaken overall average carries over to the California form, the deduction limit is calculated using the mistaken average as denominator, so I get only about half the credit I should. Since the CA cap is the same as the Fed cap for these loans, the two should have the same deduction. But TT thinks otherwise.

The obvious override is simply to enter a pretend 1098 that combines the two loans and their interest payments, since that way the average is the orig loan's Jan 1 balance plus the refi loan's Dec 31 balance divided by two, and that then carries over correctly to the California form. Or I can just override the miscalculated figures individually.

I'm hoping that the handling of refis will get corrected before filing time.

Please suggest how to proceed?

D

DianeC958

Level 12

When you enter the refinanced mortgage information in Box 2 it is asking for the amount of the loan as of 01/01/2019. For the refinanced loan the amount is $0 because at the beginning of the year the loan did not have a balance.

Please review the amount for your refinanced loan and the program will work.

Link to Mortage Refinance Deductions

@jgackson

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C

CCap

Level 4

Thank you for your response. So, just to be clear, even though box 2 on the 1098 reads a certain about, I should just plug in 0?

on a similar note, if my mortgage was transferred to another lender during the year, do I also put $0 for box 2 on the new lender’s 1098?
I could’ve sworn box 2 said “balance as of 1/1/2019 OR balance at the time of acquisition” - is that not right?

thanks!!!

C

CCap

Level 4

I am having the same issue. TurboTax thinks I have 2 million in mortgages, when it’s really a single $500,000 debt that’s been refinanced/acquired multiple times.

J

jvskarthick

Level 2

Am also having same issue, did refinance last year, so received two 1098 form from each lender (for the same property). when we enter two 1098 form both the loan "Outstanding mortgage principal" box 2 is getting added and goes more than 750K, which is causing issue. "mortgages total more than $750,000, your mortgage interest deduction is limited. " Actually my loan balance as of Jan-2019 is 500K". please provide the suggestion should we add all the other boxes from two forms other than box 2 and create one 1098 entry. Thanks JK.

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SemperFi2006

Level 2

I spoke today with a tax expert affiliated with Military One Source. He said this is something that is common, and that you should enter only the first 1098 and combine the interest. I also combined the property taxes, however, I went to the tax collector website for San Diego to make sure I had paid the right amount of property taxes. It usually is in two installments, but a payment is for the year before. You can also call your mortgage lender to verify the amount of property taxes paid for 2019, since usually they are the ones that make those payments from your escrow account. I wasted so much time trying to figure this out, I hope this can help someone!

C

CCap

Level 4

Turbo Tax online didn’t work for me either, it seems. Let me ask you - when you do the online version are you plugging in $0 for box 2 on the refinanced mortgage since no balance on Jan 1? The TT directions appear to require that, however then it would not accurately reflect what’s in the box. Desktop TT will not let me enter 0 for that box, either.

S

SL83

Level 2

I tried the 0 in box 2 but it gave an error. I used the live version so I could get extra help. Once I entered the amount from the 1098 on box 2 for the refinance it worked.

jgackson

Level 3

This is a long post, sorry, but it explains what I've had to do to get a refinanced $1m+ mortgage's interest deduction get calculated correctly in TT (downloaded, not online). So far as I can tell, the problem can't be solved in step-by-step; rather, one must go directly to the Federal and California "Ded Hom Mort" worksheets and do some manual data entry and overrides.

My initial mortgage was in April 2017, and so has the $1m federal limit rather than the later $750k one. The refi was Aug 2019, but since it's a no-cash-out refi it too is subject to the $1m limit, since the earlier origination date carries through to the refi as the debt acquisition date.

First, the Fed form. The key here is to enter the "months loan outstanding" counts in the third line of Part 1, in addition to the interest paid on each loan in the first line. Then, in my case (a pre-15Dec17 original mtg), enter the beginning balance and principal applied for the orig and refi loans in the "......before Dec 15..." block; the worksheet will then calculate the end balance for each loan and the average balance adjusted for the number of months. That then flows down to line 2, on page 2, and further automatic calculations ield the deductible amount in Line 15, which then transfers to Schedule A. It would be nice if the step-by-step asked the right questions to fill out the worksheet, but at least the worksheet can be filled out without changing data from the 1098s.

Then the problem child, the California form. California sticks with the pre-2017 rules for my mortgages, so you'd expect its deduction limit to be the same as Fed--but no, since California allows an additional $100k on the limit (that is, you can deduct interest on up to $1.1m rather than the fed $1m). The California Ded Hom Mort worksheet looks like the federal one, but unfortunately it's quite different: it draws some data from the 1098s directly, doesn't understand that acquisition dates carry over to refis, and then fails to pro-rate the averages for the two loans (instead, it adds them together, so it appears there are two active mortgages rather than an original one and a refi).

The fix I found, until TT repairs the worksheet, is to override several entries and enter balances in a particular way. First, enter the months each loan was active in the third line. Second, override and delete the "Mortgage Origination Date" line for all loans in Part 1. Override and delete everything in the "on or after Dec 15" block (assuming, that is, that your orig loan was before that). In the "...before Dec 15" block, enter the begin year balance for the orig loan (which may be there already) and the same number as "principal applied", which will make the ending balance for the orig loan 0. For the refi, enter the initial balance at refi and the principal applied through end of year, and the worksheet will calculate the end balance. The worksheet will then calculate the average balance for 2019 as though there was one loan in effect for the entire year, using the orig loan's starting balance and the refi loan's ending balance. That's not exactly what the Fed worksheet does, and it'll be the same only if the refi was at the end of June. but (end-begin)/2 is California's averaging method.

The California worksheet calculates the allowable interest deduction on Line 12, and that then makes its way into the adjustment on Schedule CA.

S

sreiber

Level 2

This issue still does not appear to have been resolved. Is this going to be fixed, or do I have to use a different way to file my federal and California returns (presumably with a refund from TurboTax)? I’m having the same issue as the commenters from a month ago.

KrisD15

Level 15

These instructions have been helpful and eliminates the error with the home interest acquisition debt limit.

Whatever is limited on the Federal may be added as an adjustment (if applicable) on the California state return.

Do not alter the 1098. Enter the 1098(s) as reported. Box 2 should not be blank. Box 2 is the balance of the loan on 01-01-2019 OR the balance on the day the loan was taken out in 2019. Answer the interview questions carefully.

If you get an error concerning the balance, please follow these directions:

ONLINE USERS:

Please go back to the Home Mortgage Interest section:

Click Federal on the left side-bar

Click Deductions & Credits along the top

Scroll down to “Mortgage Interest and Refinancing (Form 1098)” Click Edit/Add

Scroll down the “Here’s your 1098 info” screen and click Done.

Next screen asks “Do any of these situations apply to you?” Select “Yes, one or all of these situations apply to me.” and Continue.

On the following screen, you will see the “Original amount”.

Enter the amount you can claim as a Home Mortgage Interest deduction in the “Adjusted amount” box. The Adjusted amount cannot be larger than the original amount or you will receive an error when trying to file. Instructions on who needs to adjust interest and how to calculate are available by clicking the blue “Help me figure this out” link.

DESKTOP USERS:

Go into Forms (top right)
Enter the amount on Tax & Int Wks
Mortgage Interest Limited Smart Worksheet section
Line A2

OR

Step by Step

Federal

Deductions & Credits

Mortgage Interest, Refinancing and Insurance Click Update

Click Done

Click Yes, one or both of these situations apply to me. And Continue

Enter the Adjusted amount and Continue

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S

sreiber

Level 2

This doesn’t work for me. I don’t need any CA adjustments because my loan is below the federal limits.

On the federal form I can override TT by going into forms and changing the answer to whether limits apply to “no.” But on the CA return the worksheet always adds together the original loan and the loan as purchased by another lender. And I can’t change those amounts manually on the form.

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zoeiryo

Level 2

I met same issue for refinancing debt interests. I refinanced for same property in year 2019 and TT showed combined amount for both loans as average loan amount . As it's greater than 1 million so partial of interest was not taxable. I logged in TT web version to schedule a free CPA call back. I received a call back in about 10 mins and he solved my problem.

To solve this by editing California state tax item by item, go to Mortgage Interest Adjustment and fill out the 2019 Ending Blanace to be 0 for the old loan.

Hope it helps.

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pz5921087

Level 2

are you using desktop version or web? Where to find the Mortgage Interest Adjustment?

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zoeiryo

Level 2

Desktop version. You have to go to step by step on state tax. Click edit then you will see.

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pz5921087

Level 2

I think I find their big boss account, if you have linkedin account, please connect with these two executives and escalate this issue

https://www.linkedin.com/in/mariannatessel/

https://www.linkedin.com/in/kwalecki/

This is probably the only effective way to bring this bug to their software engineers attention

R

rogelio_1

Level 3

Called again about my investigation # today at 3p PST. Agent STILL says it is open. So far, this is going on day 8 since reported and opened for investigation. No ETA.

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sathiya_moorthi

Level 2

Seeing same issue in CA. If the TT wrongly calculated average balance is less than $1M then full mortgage interest is deductible in CA ?

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weiwuwei001

Level 2

I have the same issue, still waiting for their fix patch.

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rogelio_1

Level 3

According to Intuit's email from their CEO below, their business continuity plan is in place and means they are working remotely; therefore, there is no reason COVID-19 should impede their ability to provide this patch. Here's the CEO's name -- feel free to attempt to contact them regarding this thread, so that we in CA can receive the amount of refund we're entitled to in order to prepare our own selves and families against Coronavirus:

Dear Customers and Partners,

We recognize that with the constantly changing COVID-19 situation around the world, this is an unprecedented time for everyone — a time that, for many, is filled with uncertainty. Our hearts and thoughts go out to each and every one of you.

I want you to know you have our commitment to continue providing you with the products and services you depend on. For more than 30 years, Intuit has focused on our mission to power prosperity around the world. This enduring mission guides us as we closely monitor, assess and respond to this situation.

As a valued customer or partner of one or more of our products and services — TurboTax, Turbo, QuickBooks, Mint, ProSeries, ProConnect and Lacerte — I want you to know that we understand the importance of the products and services we provide to you and your business. You rely on us to help power your livelihood, and we understand the responsibility that entails. Meeting that responsibility day in and day out, in any environment, is our primary focus.

In response to the current situation, we’ve implemented our business continuity plan — which examines all areas of business operations at every Intuit site — and have taken actions to ensure continued service to our customers. Rest assured, we are prepared to serve you.

First and foremost, our plan ensures the health and safety of our employees, so we can continue to deliver and support the products you count on. Considering the most recent news and announcements from the World Health Organization (WHO) and Centers for Disease Control and Prevention (CDC), we have made the decision to have employees in our offices around the world who can perform their jobs remotely, work from home through at least April 6, 2020. We’ve also offered extended sick leave for our employees should they need it. And we’ve temporarily suspended business travel.

We know many are concerned about the impact the global health situation is having on hourly employees. Intuit is continuing to pay our front-line hourly service workers during this work-from-home period. We are proud to support them in their critical roles as security officers, receptionists, food services, building operations, janitorial, fitness, mail services and shuttle drivers.

These precautionary measures have been taken to limit the potential spread of the virus, to support our employees in this challenging time and to ensure we maintain our ability to serve you, our customer, for the long term. Our senior leadership team remains vigilant and is monitoring the situation in real time and responding rapidly as conditions evolve.

Please be safe and stay healthy.

Sasan Goodarzi

Intuit Chief Executive Officer

F

forrest1688

Level 2

I have the same issue. Any update?

D

DDC53

Level 2

where do I add the information to claim the refinance mortage?

VictoriaD75

Level 12

Follow these steps to add mortgage interest deduction if that is your area of concern:

Under the Federal menu, choose Deductions & Credits
Expand the menu for Your Home
Click Start/Revisit next to Mortgage Interest and Refinancing (Form 1098)
Enter the information on the screens that follow. You may Add a 1098

The limit on the amount of interest has changed under the Tax Cuts & Jobs Act. The interest deduction pre-TCJA has been available to qualified mortgage debt up to $1 million ($500,000 married filing separately).

Through 2025, the TCJA has lowered the amount of qualified mortgage debt to $750,000. For qualified mortgage debt incurred on or before December 15, 2017, the $1 million limit remains in place, thus "grandfathering" existing mortgage debt.

If you need to remove the interest limit, follow these instructions.

For desktop versions:

In Forms view, locate and click on Tax & Int Wks on the left from the forms list
On the form, scroll to Mortgage Interest Limited Smart Worksheet
Click on NO to the right of the question, Does your mortgage interest need to be limited

For online versions, after entering the 1098 interest information, continue through the screens and TurboTax will ask you if the interest needs to be limited.

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K

karenrner

Level 2

The only fix I found that I am comfortable with is combining both 1098s and entering "one" 1098 with the combined total interest from our original loan and our refi. TT does ask if "the amount you entering is different than your 1098" and will give you 160 characters to explain why.

I am more comfortable explaining the reason why than attempting to manually override and change my "forms" in the CA state tax return. I have been unable to figure out how to find those forms and manually edit them anyway. I'll take my chances. Hopefully my explanation will be sufficient for the IRS and will not trigger any audits...

Thanks for the pain, TT. Fix your product!

J

JantovenNF

Level 5

@karenrner

In terms of editing / overriding, to my knowledge, you can only do this on the desktop version, not the online version.

Reading the threads, what you can override is the line that calculates the average outstanding mortgage debt you have - i.e., the issue we are having. So if you calculate by hand what your average mortgage was for the year, using the IRS' method, you can input that value and override TurboTax's incorrect calculation, which should make all of your numbers in turn accurate. At least, this is my understanding, based off of what the desktop users have reported. Just to answer your question about forms, overriding, etc.

S

Skhan484

Level 2

It depends. If your loan was sold to another lender, you don't want to add the amounts together because TurboTax will literally add them together. If you refinanced then you do need to combine. The following is guidance for handling multiple 1098 mortgage forms.

How do I handle multiple 1098 mortgage forms?

If you have multiple 1098 mortgage forms, you’ll enter them one at a time. After going through the steps with the first one, you can add a lender when you get to the Mortgage deduction summary screen. (In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance.)

But, if they're both from the same lender, and one of them has the “Corrected” checkbox marked at the top, enter the corrected 1098 and discard or shred the other one.

What do I do if I have multiple 1098s from refinancing my home debt?

If your total home debt is under $375,000 ($250,000 for married filing separate) there is nothing new for you to do in 2020. Enter each 1098 as you normally would.

Home Debt Over $375,000

Under tax law, you are limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you.

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms.

Follow these steps to enter your mortgage information:

Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender)
Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage interest, these boxes will be blank on your forms and you won’t enter anything.)
Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the refinance and enter it as one 1098. An example of this is if you refinanced two loans into one loan. Any 1098s not directly related to the refinance should get entered separately.

What if I paid points?

Points on Loans Paid Off in 2020: Enter the points on your 1098 you have started and mark you paid off the loan when promoted.

Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originated.

@bps65

What do you do if you have a refinance AND a sale between lenders (so 3 separate 1098s)? If I combine the two for the refinance and enter the one related to the sale of the mortgage separately it still aggregates the box 2 totals and incorrectly triggers the deduction limit threshold. This guidance doesn’t help solve the problem which other softwares seem to have solved, which is very frustrating.