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tweak
Level 2

MAGI calculation in TurboTax is not correct for 2019

I have entered the preliminary data for my 2019 taxes (TurboTax Home and Business, Windows).

 

The MAGI (modified adjusted gross income) calculation from TurboTax is incorrect. TurboTax reports my MAGI as equivalent to my AGI. I have some self-employment income, and TurboTax is not adding back the 1/2 self-employment tax deduction to my AGI when calculating the MAGI, per the IRS rules. This error is visible on the "IRA Worksheet" form.

 

This matters because TurboTax is overstating the amount I can deduct from a traditional IRA contribution. (I am in the phaseout range.)

 

Please correct the MAGI calculation and post a software update.

4 Best answer

Accepted Solutions
dmertz
Level 15

MAGI calculation in TurboTax is not correct for 2019

TurboTax is calculating correctly.  For the purpose of determining the phaseout of the deduction for a traditional IRA contribution there is not to be any add-back of the deductible portion of SE taxes.  See Worksheet 1-1 of IRS Pub 590-A:  https://www.irs.gov/pub/irs-pdf/p590a.pdf

View solution in original post

DoninGA
Level 15

MAGI calculation in TurboTax is not correct for 2019

IRS Publication 590-A (2019) draft, Worksheet 1-1, page 15 - https://www.irs.gov/pub/irs-dft/p590a--dft.pdf#page=15

View solution in original post

rjs
Level 15
Level 15

MAGI calculation in TurboTax is not correct for 2019


@tweak wrote:

I am looking at this article:

https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-the-difference-between-agi-and-magi-on-y...

- Which does say to add back 1/2 self-employment deduction to AGI when calculating MAGI.


That article is wrong. We complained to TurboTax about it last year, but they haven't corrected it. I'll bring it up again. And that article is not "IRS rules." It's written by someone at TurboTax, not the IRS.

 

As I said, there is not one definition of MAGI that applies to all situations. There are different definitions for different purposes.

 


@tweak wrote:

The IRS document you posted appears to be for 2018.


The IRS has not yet published the 2019 edition of Publication 590-A, but the rules for calculating MAGI for this purpose have not changed. You can download a draft version of the 2019 edition from the following link.

 

DRAFT Publication 590-A

 

 

View solution in original post

tweak
Level 2

MAGI calculation in TurboTax is not correct for 2019

Editorial note:

 

Dear Congress,

 

If you really want to enact a meaningful Tax Reform bill, then please get rid of the ambiguous definitions of terms such as MAGI and make them simple, easy to understand, and uniform. Why are there a dozen possible definitions for this term?

View solution in original post

10 Replies
dmertz
Level 15

MAGI calculation in TurboTax is not correct for 2019

TurboTax is calculating correctly.  For the purpose of determining the phaseout of the deduction for a traditional IRA contribution there is not to be any add-back of the deductible portion of SE taxes.  See Worksheet 1-1 of IRS Pub 590-A:  https://www.irs.gov/pub/irs-pdf/p590a.pdf

View solution in original post

rjs
Level 15
Level 15

MAGI calculation in TurboTax is not correct for 2019

There are about a dozen different definitions of MAGI, depending on what it is being used for. You might be looking at a definition that is for some other purpose.

tweak
Level 2

MAGI calculation in TurboTax is not correct for 2019

Thank you for your quick response.

 

The IRS document you posted appears to be for 2018.

 

I am looking at this article:

https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-the-difference-between-agi-and-magi-on-y...

- Which does say to add back 1/2 self-employment deduction to AGI when calculating MAGI.

 

I am still confused. Some other IRS documents do not mention the self-employment tax deduction in relation to MAGI.

 

DoninGA
Level 15

MAGI calculation in TurboTax is not correct for 2019

IRS Publication 590-A (2019) draft, Worksheet 1-1, page 15 - https://www.irs.gov/pub/irs-dft/p590a--dft.pdf#page=15

View solution in original post

tweak
Level 2

MAGI calculation in TurboTax is not correct for 2019

Thanks, DoninGA and everyone else.

 

I see on the draft 2019 IRS doc you posted that the 1/2 self-employment tax reduction, for the purpose of traditional IRA deductions, is NOT figured into MAGI. 

https://www.irs.gov/pub/irs-dft/p590a--dft.pdf#page=15

 

I also did not realize their are multiple MAGI calculations for different purposes.

 

---

As a follow-up question, has MAGI for calculating traditional IRA deduction limits always excluded the 1/2 self-employment tax? Or is this a recent change in the tax law?

 

I very much appreciate all of your helpful replies!

- tweak

rjs
Level 15
Level 15

MAGI calculation in TurboTax is not correct for 2019


@tweak wrote:

I am looking at this article:

https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-the-difference-between-agi-and-magi-on-y...

- Which does say to add back 1/2 self-employment deduction to AGI when calculating MAGI.


That article is wrong. We complained to TurboTax about it last year, but they haven't corrected it. I'll bring it up again. And that article is not "IRS rules." It's written by someone at TurboTax, not the IRS.

 

As I said, there is not one definition of MAGI that applies to all situations. There are different definitions for different purposes.

 


@tweak wrote:

The IRS document you posted appears to be for 2018.


The IRS has not yet published the 2019 edition of Publication 590-A, but the rules for calculating MAGI for this purpose have not changed. You can download a draft version of the 2019 edition from the following link.

 

DRAFT Publication 590-A

 

 

View solution in original post

tweak
Level 2

MAGI calculation in TurboTax is not correct for 2019

Thanks, rjs. 

And thanks, dmertz.

 

Much appreciated!

- tweak

tweak
Level 2

MAGI calculation in TurboTax is not correct for 2019

Editorial note:

 

Dear Congress,

 

If you really want to enact a meaningful Tax Reform bill, then please get rid of the ambiguous definitions of terms such as MAGI and make them simple, easy to understand, and uniform. Why are there a dozen possible definitions for this term?

View solution in original post

dmertz
Level 15

MAGI calculation in TurboTax is not correct for 2019

The tax code does not use the term "MAGI" or "modified AGI," so Congress has nothing to do with this.  For a particular purpose, the tax code simply specifies that actual method.  § 219 is the section of the tax code that covers the deduction for a traditional IRA contribution.  For the purpose of the phaseout of this deduction, § 219(g)(3)(A) says:

 

(A)Adjusted gross income  Adjusted gross income of any taxpayer shall be determined—


(i)after application of sections 86 and 469, and
(ii)without regard to sections 135, 137, 221, 222, and 911 or the deduction allowable under this section.

 

For any particular purpose, the modifications to AGI depend on the particular purpose, so there can be no one set of modifications, contrary to what is implied by the misleading TurboTax article.

rjs
Level 15
Level 15

MAGI calculation in TurboTax is not correct for 2019


@tweak wrote:

Dear Congress,

If you really want to enact a meaningful Tax Reform bill, then please get rid of the ambiguous definitions of terms such as MAGI and make them simple, easy to understand, and uniform.


About 15 years ago some people in Congress decided that it was confusing to have different definitions of a qualifying child for different purposes. There were different definitions for claiming a child as a dependent, filing as head of household, the earned income credit, and so on. So with great fanfare they passed a new law establishing a "Uniform Definition of a Child," UDC for short. But uniformity didn't even survive the legislative process. The Uniform Definition of a Child still had variations for different purposes, and still does today. So don't get your hopes up.

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