Discrepancy between 2020 tax return and What-If worksheet

[prlaba]

I used TurboTax Deluxe 2020 to prepare and file my 2020 federal tax return.

After e-filing my return. I opened the What-If worksheet and used the "Copy column 1 to column 2" option to copy my return's amounts (in column 1)  to column 2.  I expected to see the same amounts in both columns.  Surprisingly, I saw that my Taxable Income and Total Tax amounts were considerably lower in column 2 compared to column 1.

After investigating, I discovered that the lower Taxable Income and Total Tax amount in column 2 of the What-If worksheet were due to a lower calculated Taxable Social Security amount compared to the amount listed on my return.  The amounts should be identical.  After more digging, I found the difference to be related to the Unemployment Exclusion credit offered in 2020 (designed to lower the tax on people's unemployment benefits).

TurboTax lists my Unemployment Exclusion credit  as a negative amount on line 8 of Schedule 1.    As a result, line 9 of Schedule 1 (the sum of lines 1-8) correctly reflects my lower Additional Income amount (line 9), reduced by the amount of the Unemployment Exclusion credit on line 8.

But line 3 of my return's Social Security Worksheet, which combines lines 1, 2a, 2b, 3b, 4b 5b, 7 , and Schedule 1, line 9, does not include the line 9 amount from Schedule 1; instead it includes only the amounts from Schedule 1 lines 1-7.  Specifically, it does not include the Unemployment Exclusion credit listed on Schedule 1 line 8.  This results in a higher taxable Social Security income, which in turn results in a higher Taxable Income and a higher Total Tax.

But the What-If worksheet does include line 9 from Schedule 1, resulting in a lower taxable Social Security income, which in turn results in a lower Taxable Income and lower Total Tax.  (I manually filled out a Social Security worksheet form, to confirm that the lower Taxable Social Security amount was due to the Unemployment Exclusion credit from Schedule 1 line 8 being applied.)

Obviously either my tax return is correct or the What-If worksheet is correct, but not both.  Either my tax return's Taxable Social Security amount was computed correctly, or the Taxable Social Security amount  on the What-If worksheet was calculated correctly.

Based on the IRS instructions, it would appear that the Unemployment Exclusion credit should be applied when calculating Taxable Social Security on the Social Security Worksheet, since that credit is reflected in the amount on line 9 of Schedule 1.   But I was unable to find any IRS instructions for applying (or not applying) the Unemployment Exclusion credit in calculating Taxable Social Security.

So was my tax return calculated incorrectly?  Should I have paid less in taxes?  Or was my tax return calculated correctly, and it's the What-If worksheet that's in error?

Obviously, I'm hoping that the What-If worksheet is correct. 🙂

If anyone has run into this issue, or can shed more light on this topic, I'd appreciate hearing from you. 

[Mike9241]

for purposes of computing taxable income for purposes of taxable social security, there is no exclusion for UC

When figuring modified adjusted gross income for any of the following deductions or exclusions, include the full amount of your unemployment compensation reported on Schedule 1, Line 7, unreduced by any exclusion amount:

Taxable Social Security Benefits (Social Security Benefits Worksheet in the Instructions for Form 1040 and 1040-SR)

[prlaba]

Thanks!

That means that my Taxable Social Security amount was calculated correctly on my federal return, but was not calculated correctly on the What-If worksheet.

Is there an IRS publication or other notice that states what you said?

[dcortez]

I have had the same problem. Copy return to column 2 does not copy the numbers in my return. Yet my return was error checked and nothing was reported.  In some cases, the return number is simply missing. This makes the What-if useless. So I manually correct the errors in column 2. This forces the two columns be identical.   Then there is other problems: 

When I make the change in the main problem (i.e reduce pension distribution, etc.), the program shows the change in fed and state tax due. But the same change in What-if gives a different result in fed tax due.  Makes no sense. What-if is not a reliable tool.  I wish it was since it could be a great feature.

Pro Series has a similar "forecasting" worksheet which is more sophisticated.  But I have seen the same problems. 

TT should include the Pro Series version.  But the bugs still need to be worked out.