I have been talking with TurboTax for months about a glitch I found in their software and can't get them to acknowledge it and correct it. In computing the allowable deduction for a carryover of unused capital gain property contributed to a charity in a prior year, the TurboTax program does not apply the correct limits on the allowable deduction and overstates the allowable carryover deduction. It's easy to see that this is happening by running two "dummy returns" through the program: Report $1,000,000 of IRA distributions , $400,000 of cash contributions (which are NOT eligible for the new 100% of AGI limit on deductibility of certain qualified cash contributions in 2020) and $200,000 of capital gain property contributions in the current year (with no carryovers) and the program correctly computes taxable income of $500,000, properly limiting the deduction for charitable contributions to $500,000 (50 percent of AGI), consisting of the $400,000 in cash plus $100,000 of the capital gain property. There is a carryover of the remaining $100,000 of capital gain property that can't be deducted this year to the net five years. But now just add a carryover of $200,000 of unused capital gain property contributions from 2019 of $200,000 and the program also allows $100,000 of the carryover to be deducted in 2020, resulting in taxable income of $400,000. It allows a total charitable contribution deduction for 2020 of $600,000, consisting of the $400,000 in cash, $100,000 of capital gain property contributions made in 2020 and $100,000 of the carryover, with the remaining unused $100,000 of 2020 capital gain property contributions and the remaining unused $100,000 of the carryover from 2019 to be carried over to future years. That is impossible. If all of my current capital gain property contributions can't be deducted, then none of the carryover can be deducted -- current contributions always come before carryovers. The same limits apply to the carryovers of unused capital gain property contributions from a prior year as apply to capital gain property contributions in the current year. The taxable income with the carryover should be the same $500,000, but it isn't. They are applying an overall limitation of 60 percent of AGI to compute the allowable deduction when a current contribution and a carryover is involved, and an overall limit of 50 percent of AGI when no carryover is involved. That is incorrect. The same limits apply to both, and the proper overall limit on all contributions for the year 2020 is 50 percent of AGI, not 60 percent of AGI, in both cases. The only way the 60 percent overall limit applies is if very large (greater than 50 percent of AGI) contributions of cash were made in 2020.
Would someone please acknowledge this error in the software and fix it? It can result, in the most extreme case noted above, in overstating the allowable deduction by 10 percent of AGI.
It is not overstating my deduction by that much but it is overstating it and producing the wrong tax liability (too little). I will not knowingly file a tax return that understates my tax liability -- nor should I be required to. The IRS will apply the correct limits. kick out my return, and cause me a headache I would prefer to avoid.
Please fix this.
I am using the CD download version of TurboTax 2020 Deluxe, but I believe that the program produces the same error with the on-line version, since I was asked to send a diagnostic copy of my return to TurboTax and they declared that their program produced the same result. They assume that result is correct and refuse to either refund my money and let me buy another tax preparation program that works (I ran the numbers through two other commercial preparation programs and they produce the right calculation) or correct the error in their software so that my return prepared by TurboTax will be correct and not cause me problems.
I have used TurboTax for many years without problems, so this disturbs me greatly.
Any suggestions?
