2021 qualified contributions note in Schedule A line 11

[excel20]

I submitted a paper return for 2021 and included a qualified contribution under Cares Act Sectiion 2205 which allows a deduction up to 100% of AGI for qualified cash contributions. I checked the 50/100% box on the contribution and TurboTax Desktop included the annotation on schedule A line 11. However, the IRS reduced the total deduction to 60%. I submitted additional documentation about the contribution to the IRS but the IRS is still claiming a Math Code Error: 180 and reducing the deduction.

I spoke with several IRS agents by phone. One agent verified that deduction should qualify based on entering data [that I provided over the phone] into a separate IRS tax code system. However the agent could not explain why the system reduced the deduction or fix it. Other agents also appreciated the issue but could not correct it.

Since the return was paper filed, the IRS does not have an original copy of the submitted return - only their system version. I suspect the issue is how schedule A line 11 is coded in the IRS system. Another post for 2020 in this forum mentioned this potential issue.

The agents I spoke with suggested several options:
1) Reply with another letter with more documentation on Section 2205, the cash contribution, etc.
2) Go into an IRS service center and speak with a tax law certified representative
3) Submit an appeal
4) Reply to the letter and include a paper 1040X amended return that has the same numbers, but includes the annotated schedule A and supporting documentation. The agent said this paper 1040X would get processed and be fully scanned, so that the "Qualified Contribution Elected" information on schedule A would be accessible to agents.

I am leaning towards option 4) - filing an amended return. If my assumption is correct - that the IRS system has an incomplete schedule A, then the amended return will hopefully fix this and the system will generate the correct deduction.

Does this seem the best approach?

[Critter-3]

I agree ... since the IRS has already changed the return going the amendment route would be correct. 

[excel20]

I incorrectly stated this initially as for 2022. This issue relates to 2021. I updated the post. Apologies for any confusion.

[Critter-3]

Same answer applies to all tax years. 

[Mike9241]

you may want to contact the IRS Tax Advocate Service.  this would likely be under an IRS System Issue 

https://www.taxpayeradvocate.irs.gov/contact-us/#FindlocalTAS 

once on the page scroll down to select your state

[excel20]

While preparing the 1040-X, I noticed something I do not understand. In 2021 my charitable deductions included direct cash, cash to a donor advised fund, and appreciated equities to a donor advised fund.  If I change the direct cash donation to a 50% organization (instead of 50%/100%), then TurboTax does two things:
1) it pushes the entire equity contribution out as a carryforward
2) it reports the total cash (direct + DAF) as a full deduction. This total is around 58% of AGI.
This seems to be the best option, since including the equity contribution would limit the total to 50%.

However, the IRS computer limited total deductions to 60% of AGI. This seems strange. If it retained the equity deduction, I would expect the limit to be 50% of AGI. And it if dropped the equity deduction, I would expect the limit to match TurboTax at 58% of AGI. So it seems like the IRS computer included at least part of the equity deduction but limited the total to 60%. Unfortunately, the IRS transcript only shows the change in total charitable deductions (line 14). The system does not show modified entries for lines 11 or 12.

Does this make sense?

[excel20]

I think that the math problem is with TurboTax.
This thread about 2020 discusses the issue as well:
https://ttlc.intuit.com/community/tax-credits-deductions/discussion/problem-that-turbotax-does-not-b...

TurboTax reports the Qualified Contribution Elected as the difference between the total charitable deductions and 60% of the AGI. The problem is that results in a lower deduction as calculated by the IRS.

As an example, let's try:
100K$ AGI
35K$ qualified cash
15K$ non-qualified cash
20K$ non-cash
50K$ total cash

The TurboTax Charitable Deductions Limits Worksheet follows the pub 526 worksheet and calculates the non-qualified cash as 15K$. This is correct. However, TurboTax only shows 10K$ on the dotted line on Schedule A line 11 instead of 35K$. The IRS does not see the worksheet - only the dotted line amount.
So, the IRS thinks that 40K$ is non-qualified (50K$ - 10K$) instead of 35K$. This propagates into later calculations and reduces the total deductions to 60K$ instead of 70K$ based on IRS rules. But TurboTax reports a 70K$ deduction. So, the IRS computer sees an error in the calculations.

I ran a test return on a trial version of TaxAct and they correctly report the full 35K$ qualified contribution amount on the dotted line for line 11.

When I use the IRS rules based on the numbers on my return, I get a different total deduction than the IRS. But I suspect that since the IRS sees an inconsistency in the reported deductions, it just limits the total to 60% of AGI.

I think I need to submit a modified version of Schedule A showing the total qualified contributions on the dotted line of line 11 instead of the reduced amount calculated by TurboTax.