Federal tax due increases when second 1098 is added

Forum|Forum|5 years ago
March 14, 2021
1 reply
0 views

Hi,

It doesn't make sense that the Federal tax due in the header increases significantly when second 1098 form from 2nd lender is added.

Federal tax due after entering first lender 1098 is added: $2487 (in red)

Outstanding principal is $418k

Refinanced loan in Nov '20. Added 1098 information from refinanced loan as second lender.

Federal tax due increased to $3887 (in red) moment I say Yes to "Is this loan secured by property of min?".

We only paid interest of $710 in 2020 and it was refinanced so outstanding principal is $401k. So it's little unclear why selection of Yes to the loan secured screen should increase the federal return due by $1400. Is this buggy?

We did report property tax in rental property section and the property tax is not reported in both lenders' section. I also said, no points on one of the screens before it adjusts the federal tax due field.

If I have say No - not secured then it goes down to $2487 (in red).

Very confused on this behavior. One would think by adding more interest would reduce from $2487 by few dollars. The only major difference is the reduction in outstanding principal balance to $401k in reporting 2nd 1098 entry.

Completing subsequent page that says "Is this refinanced, etc?" doesn't change Federal tax due information from $3887 to $2487.

Thanks in advance!

JohnB5677

Level 15

If you've refinanced or had your mortgage lender changed, the outstanding mortgage principal listed in the combined total of them on Line 2 of the 1098 will be too large.

When you put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest".

To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement. Enter both 1098's.

Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal".

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

FzAllAuthor

Level 2

Thanks for your response JohnB5677!

I get an error from TT saying, "Outstanding mortgage principal must have value " when I entered 0 to paid of loan 🙄. I updated to 1 as well but still the txa difference jumps by $1400.

I think TT should include a checkbox that says this loan is paid off on the form and use that for calculating overall mortgage principal. This'll allow TT to do sum of all mortgage entries and provide accurate information thus avoiding such errors.

These forms are meant for dummies and I consider myself very proficient with software applications, if it trumps me I can't imagine how many others are unaware of these issues. A person simply entering information from 1098 may not know the impact on their returns due to this gltich.

In addition, I tried multiple combinations in my test. TT offers wrap up sheet once all 1098s are entered, I think it's supposed to do the calculation I referred above and in your reference. Confident to say it's not calculating correctly and is buggy. I remove second 1098 and the tax due changes significantly.

Thanks again JohnB5677!

FzAllAuthor

Level 2

Is there a moderator from TT / Intuit on this forum?

I think I found the bug in further digging into why the tax due/refund changes significantly. In a nutshell, Sch A line 8 is not taking into consideration rental property interest allocation from Sch E line 12a when second refinanced loan is added and it changes the deduction to standard deduction instead of itemized deduction.

I'm unsure of the fact if Sch A is supposed to use sum of effective interest from mortgage interest work sheet line 16 + Sch E line 12a to begin with.

Response from moderator will be appreciated.

Thanks!