This turns out not to be a bug, per se, in Turbotax, but a combination of a misinterpretation of the data input field on the step-by-step for employer withholding for a household employee, and the shielding of the user from the calculated amounts. Specifically the field titled "Social Security and Medicare tax withheld by state (withholding on state disability payments)" seems to imply that the total sum of funds withheld for the employee should be entered there. When that happens, the result is that on line 8 of the Schedule H, the word 'DISABILITY' appears with the number below it, but it is not entered into the actual line 8 box. Therefore, the form shows that the amount of tax owed is zero in line 25, which is incorrect. The reason the user entered data in that field was because the payroll company had generated a Schedule H to use, which showed the calculations for each of the taxes in Part I, lines 1-8. However, the Turbotax step-by-step screen does not ask for the actual social security and medicare taxes. Instead the step-by-step has the above-mentioned field for the Social Security and medicare tax, which confused the taxpayer, who thought they needed to enter the sum of the taxes calculated by the payroll company in that field. Note that the field mentioned also has a parenthetical comment that the number refers to withholding on state disability payments. But since this is parenthetical and the field name refers to social security and medicare taxes, it was confusing. Once the taxpayer removed that data, the resulting Schedule H was corrected. I mention all this because in a more than 3-hour phone conversation with Turbotax help, plus the initial response to the problem report, no one identified the actual problem and data entry error. You should know that the way we discovered the solution to the problem was to ask the Claude A.I platform about the problem. It precisely pinpointed the problem. Specifically, it said:
"The reason is the "Line 8 — Taxes Withheld from State Disability Payments Smart Worksheet" that TurboTax is running. It's treating the $1,823 as coming from state disability withholding payments and offsetting it to zero on line 8, rather than flowing through the normal calculation from lines 2, 4, 6, and 7.
This appears to be a TurboTax data entry issue. The $1,823 disability figure (likely from your nanny's state disability insurance) seems to have been entered in the wrong field, causing TurboTax to net it out incorrectly."
Is this a bug? No exactly. But Turbotax could probably be a little more helpful in guiding data input, AND, Intuit help personnel might be well advised to know about this potential likelihood of taxpayers entering data incorrectly.
I hope the above information is helpful to you. If you need further information, or screen shots to further elucidate this report, let me know. Also, we created a mock tax return file that easily illuminates the problem -- that is, shows the incorrect Schedule H when data is entered incorrectly in the above-mentioned field, and the correct Schedule H when no data is entered in that field. If you need this test file uploaded, let me know.
Fred Gluck
