Error in Form 2210 Turbotax 2021

[Tax4fp]

I agree that the problem with line 14 (a)-(c) is related to how TT Form 2210AI scales (QD) and doesn't scale (CG) factors to calculate the impact of CG/QD.  This is wrong and not consistent with IRS Pub 505 worksheet 2-8 which would scale both.  Fix your program TT.

[salilm1]

I have been seeing this for a few weeks. TurboTax is appalling as I said earlier w.r.t to 2210. But maybe they are thinking if you are late with payments, we will be late with this form!!

[bbakercpa]

Maybe the TT programmers are just unable to implement the IRS rules for the 2210 and the 2210AI. I also believe they are unable to apply the correct application for handling multiple 1098’s for the same loan. Pretty simple, assuming all the 1098’s are for one loan (I had three for the same loan), a worksheet with beginning and end dates so that the originating and end loan balances are not summarized into a loan balance that is greater than my loan. 
I am at a loss as to what happened to TT this year. 

[Tax4fp]

@kevinandlori 

I disagree with your statements about line 14 that indicate that TT assuming CG are one time events and not scaling them for that period is even reasonable.  Even one time events are multiplied by the scaling factor to determine the annualized total income for a given period per IRS rules.  If TT doesn't also scale the CG amount and subtract that from the total income, TT will be calculating the difference at the regular tax rate, rather than at the CG rate.  In my case, the CG for period one was $10,000 (replaces your $1000 in your example).  As a result the 4 x $50,000 =$200,000 in my case includes 4 x $10,000=$40,0000 from this one time event.  When TT only multiplies $10K by 1 rather than by 4 before doing the tax calculation, it means that the calculated tax on the difference ($30K) is calculated based on 24% rate (I'm single) rather than 15% CG rate, resulting in a $2700 higher calculated tax in 14 (a) and a $600 estimated underpayment for that period. Since the issue also exists for the second and third periods, the incorrect calculations in 14 (b) and 14 (c) generate additional incorrect underpayment estimates which resulted in TT saying I owed an underpayment penalty of $132, when a proper calculation using the correct scaling factors showed no underpayment penalty is due.  If I wasn't smart enough to do the calculation separately using the actual IRS rules in Pub 505, I would have ended up paying an incorrect penalty that was 3 x what I paid for TT.  Since TT 100% accuracy guarantee doesn't cover the case where TT calculations result in overpaying the IRS, only in the case where the IRS says I underpaid, I would be screwed out of $132 because TT can't apply the proper scaling factor that IRS Pub 505, Worksheet 2-8 says it should. 

[Tax4fp]

There is a way to get TT to correctly calculate line 14 (a)-(c) if you have any long term capital gains in the first three periods.  Simply enter the combined total of cumulative CG/QD into the inputs for QD and enter zeros in the LT CG boxes.  TT will then properly scale the total CG/QD by the respective period factors and produce the correct values in line 14 (a)-(c) that TT uses to determine whether an underpayment has occurred.  The specific breakdown between CG and QD is never shown in either Form 2210 or Form 2210AI that get filed when forms are printed and the IRS accepted a return that was e-filed with this tweak.  Use of this option should be considered if TT calculates that an underpayment is due in order to eliminate or reduce a penalty that TT has over estimated because of their failure to properly implement the IRS requirements in Form2210AI.

[bbakercpa]

Very Creative... I had to do a similar 'fix' to handling three 1098's for the same loan in 2021. TT 'expert' just add them together, my approach was to in essence create three 1098 worksheet's filling in each for only the needed data. For the 2210 problem where the total of my estimated taxes 'including' my carryover refund from 2020 that was applied to my first quarter estimate for 2021, I had to override the field on the 2210. Now the Tax Payments Worksheet agrees to the 2210.

It is too bad that TT is unable to fix these issues and relying on us to be creative.

[salilm1]

Yes creative. Pity that TT cannot fix the issue and we have depend on this tweaks. Thanks a lot. Excellent this works.

[Tax4fp]

I wondered if the problems with line 14 in 2021 Form 2210AI were only occurring this year or had been in TT in previous years.   I had a similar large LT CG in March 2018 which had been entered as CG in the first period  of 2018 Form 2210 and used  my 2018 version of TT to check whether entering my total CG/QD in the QD line and zero in the CG line for the first period changed 14 (a) from the normal method where LT gain was entered as CG input and actual QD was entered as QD input.   Both results using 2018 TT were the same showing that TT in the past was correctly scaling both CG and QD in calculating Form 2210AI line 14 as it should be per IRS Pub 505.  The incorrect calculation in 2021 TT Form 2210AI appears to be a new issue rather than a long term one so their programmers should know how to do it correctly in 2021 if they just match the programming from those earlier years.  We shouldn't have to result to tweaking the input data in 2021 just to get 2021 TT to correctly calculate underpayment penalty.

[KevinInBoise]

I was able to refile successfully Mar 7 after having my return rejected by the IRS on Feb 24. I did have interest, capital gains distributions, ordinary and qualified dividends but nothing else "messy".  Most of my  investment earnings were end of year and my penalty/interest would have been minor if I had not gone down the 2210/Schedule AI pathway to eliminate it so I don't believe my return is any indication that more elaborate issues have been resolved.

Good luck to all you others who are awaiting a full resolution.

[kpf226]

I'm having a further problem with Form 2210, column (a) - this time Line 11. I had an overpayment from 2020 that I credited to my 2021 taxes. It is enough to cover my Q1 estimate. However, the only amount shown in Column (a), Line 11 is 1/4 of my annual withholding, resulting in a penalty.

[Tax4fp]

@kpf226 

Since latest update of TT on 3/11/22 still doesn't fix any of the issues with Forms 2210 and 2210AI, TT may never fix the remaining problems including your issue with line 11.  In lieu of including your 2020 refund as a tax payment credited to 2021 tax return, you could instead just include the amount of 2020 refund as a fifth estimated tax payment with the paid date being the date that your 2020 return was filed and/or accepted by IRS, which I assume was on or before 4/15/21.  Looking at the tax payment worksheet in TT, this would result in the same total of estimated tax payments and refund credits for the year and should result in TT increasing line 11 (a) by the amount of your 2020 refund  (via the fifth estimated payment tweak) which should eliminate the bogus underpayment penalty.

[bbakercpa]

I reported this issue at least 6 weeks ago and TT seems unable to fix that the total of line 11 from form 2210 must equal the total estimated taxes from line 20 of the Tax Payments Worksheet. I just did an 'override' of line 11a.

[bbakercpa]

I just did an override of line 11a to account for the tax refund carryover from my 2020 tax return. Now lines 11a-11d equal line 20 on the Tax Payments Worksheet.

[kpf226]

Thanks. I'm always reluctant to override TT for fear that the error is mine - but sounds like it's not, and this is the only way to get rid of the erroneous penalty.

[ryan-p-abraham]

Ok so I finally took the time to go through some of the posts and try out a few experiments .  And yes form 2210 yes is very messed up and still remains unfixed. But their error are so bad that  TT also has screwed up the Underpayment Penalty worksheet as well so that in certain cases the two screw ups cancel can each other out.

They 100% DO NOT account for Using  the 2020 refund being applied to the Q1 estimated taxes on form 2210 . But magically a payment  from the 2020 refund does get applied to the Underpayment penalty worksheet .

Below is a fictional case after messing around with some numbers when trying to calculate some fake penalties to see what TT would do

In this example

Form 2210 line 10 A is set at $49,431

Form 2210 Line 11 A -is set  INCORRECTLY show $43963  of total first quarter taxes paid and does not factor in the $3500 applied from last years refund.    Box 11 SHOULD be $47463

So after the subtraction Form 2210 line 17 says the underpayment that is owed is $5468 which is $3500 to high .

But when you go and look at how TT transfers  this  information  to the underpayment calculation worksheet.

Line 17 and line 10 transfer over as is to the Required installment and  underpayment section

But then magically a line for the $3500 from the previous years taxes is also transferred some how on top of the incorrect number from box 11A . Now the correct underpayment of  only $1968  is what is used to calculated interest on and not the incorrect value of $5468 . So Form 2210 is wrong bu them penalty in the end is correct in this case.

At this point  I have no faith in turbo tax fixing any of this ... Maybe we can file a class action law suite and charge them for all of the false underpayment penalty's