2018 Form 1040 - Line 4a has incorrect value!!

[rochrunner]

I have income from an IRA with a QCD that reduces the taxable amount, and I also have a pension. Line 4a on the 1040 is supposed to have the total of all IRAs and pensions, and line 4b has the total taxable amount. On my final 1040, line 4a was less than 4b, which is clearly not possible. The error turned out to be in the 1040 Worksheet. The entries for the line 4 calculations are, from the top, IRA distributions; Taxable amount; Pensions and annuities; and their Taxable amount. The 3rd line, which should have been the amount of my pension, was left BLANK by TT, although the taxable (full) amount of the pension was correct on the 4th line.

To fix it, I overrode the blank line and entered the amount of the pension distribution. This corrected line 4a on the 1040 and it was then greater than line 4b (by the amount of the QCD deduction).

Although none of this affected my bottom line or taxes owed, it seems like a sloppy mistake and is the second error I've encountered in this year's software. I've been using this program since the DOS days and won't immediately ditch it, but I will be more careful from now on in checking its results!

[NCperson]

your assumption is incorrect; Turbo Tax is correct . Pension payment flow to line 4a but IRA distributions do not

please see page 29 of the Form 1040 instructions at the link below 

at the VERY top on the left of Page 29 it states:

"Except as provided next, leave line 4a blank and enter the total distribution (from Form 1099-R, box 1) on line 4b. The IRA distribution is not included in line 4a per the IRS instructions.  

But the pension payment is to be included in line 4a At the very bottom of Page 29 (on the right) and continuing onto page 30, the IRS instructions discuss Pension payments.  It's a little convoluted the way it's written as it goes on to state that there are a few exceptions to flowing the Pension Payments to line 4a, but it infers a normal pension payment should be listed on Line 4a - which is exactly how Turbo Tax works. 

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

what is the other error you uncovered? maybe TT was correct there as well?????

[rochrunner]

Thanks for the info. OK, you're correct about the pension not going on line 4a, but in my case the IRA distribution does go there per Exception 3 on page 29 since, as I mentioned, I had a QCD which deducts from the amount of the distribution (which happens to be an RMD). Still makes the values there look "off", but not much more than the way the whole new 1040 is laid out! 🙂

The other error is with form MI-2110 of the Michigan return, for calculation penalty and interest. At one point, it takes 25% of $30 and comes up with $30, leading to a ridiculous underpayment penalty. That was definitely something that I needed to correct manually and enter the correct values. I've done tax prep work for AARP's TaxAide program and am familiar with how it's supposed to work.

[prtaylor56]

@NCperson 

The instruction you reference is for a single, fully taxable IRA distribution.  The problems that people are reporting are for multiple distributions where some are partially taxable, and are being included on 4a, while others are fully taxable and are being excluded, leading to a dollar amount on 4a that is less than 4b.

What about these IRS instructions for multiple distributions, that you are ignoring?

For IRA's: "If you (or your spouse if filing jointly) received more than one distribution, figure the taxable amount of each distribution and enter the total of the taxable amounts on line 4b. Enter the total amount of those distributions on line 4a."  (page 29 of IRS 1040 instructions)

For Pensions: "If you had more than one partially taxable pension or annuity, Figure the taxable part of each separately. Enter the total of the taxable parts on Form 1040, line 4b. Enter the total pension or annuity payments received in 2018 on Form 1040, line 4a." (page 31 of IRS 1040 instructions)

[NCperson]

Subsequent to my original post, i did come across the same language you posted

"For IRA's: "If you (or your spouse if filing jointly) received more than one distribution, figure the taxable amount of each distribution and enter the total of the taxable amounts on line 4b. Enter the total amount of those distributions on line 4a."  (page 29 of IRS 1040 instructions)"

and as late as a week ago, TT was only following this language if there were multiple exceptions (e.g. a rollover to a Roth is a type of 'exception') 

but in recent releases they appear to have adjusted the code so that if there are multiple distributions, whether they are 'exceptions' or not, they are listed on Line 4a per the language you site. 

 Line 4b, which is the critical one, has never been a problem

[prtaylor56]

@NCperson 

Well, I have the latest updates and still see the problem.  My case is a single partially taxable IRA, and a single, fully taxable pension.  Since IRA'a and pensions are reported on a single line now, this should be considered a multiple distribution.  Only the IRA is showing up on 4a, so 4a is far less than 4b. 

Here is a quote from a Knowledge Base Article for Intuit Pro Tax:

"For pensions, if the gross amount received from all pensions is not the same as the taxable amount received from all pensions, both the gross and taxable amount will print on Form 1040. If the gross pension and taxable pension amounts are the same, then only the taxable amount will print on Form 1040.  For IRAs, if the gross amount received from all sources is not the same as the taxable amount, both the gross and taxable amount will print on Form 1040.  If the gross IRA and taxable IRA amounts are the same, then only the taxable amount will print on Form 1040 unless a conversion from a traditional to Roth IRA was made."

Obviously, TurboTax still isn't doing this for me, because my gross amounts are not the same as my taxable amounts from all distributions.  Can you (or anyone) help get this fixed?  Numerous users are complaining and have called in to customer support, but still no fix.

[prtaylor56]

@NCperson 

Well I have the latest updates, and the problem isn't fixed.  I have a partially taxable IRA distribution and a fully taxable pension distribution.  Since both IRA's and pensions are combined on a single line now, that is in fact a multiple distribution.  But only the IRA is included on Line 4a, so Line 4a is far less than Line 4b.

Here is a quote from another user with the same issue, who has spoken with the IRS:

"I did speak with someone in the correct dept. for about 40 mins. yesterday (first rep transferred me) and she advised me that, in my case, everything needed to be included on line 4a. Of course (as many of us know) the TT software is not doing this. I had more than one IRA distribution and a partially taxable pension. My IRA distributions are not being included as part of the gross distribution so line 4a is a few thousand dollars less than line 4b."

Can you (or anyone) help get this fixed?  Many people have been complaining, but the problem isn't being addressed.

[NCperson]

on the other hand, does it really matter as long a 4b is correct.  So far no one is stating that 4b is incorrect. 

if 4b is correct, then the tax owed will calculate correctly.  

if 4a is reported incorrectly, the Turbo Tax guarantee will cover any penalties that arise where you inputted correctly but the software calculated incorrectly

I decided to move on from this one. 

[iamwhoiam]

Some people got over-refunded because the IRS corrected their returns due to 4a<4b and so IRS reversed this.  These people have to now file amended returns.  Others did not have any issues with 4a<4b.  It's logical that 4a>4b and not the other way around.   Could see all 1099-R info when pension/annuities and IRAs were separated but now that they are combined if one has one or more partially taxable pensions or IRAs then it doesn't look right.  In addition, IRS instructions state that if there are multiple IRA distributions the gross amounts should be totaled and included on line 4a.  I had 2 separate distributions and neither of them are included on 4a. There are other tax software programs that include all distributions on line 4a so that 4a>4b.  Doesn't seem to me that it would be a difficult fix and since there are people who are having issues with this then why couldn't this have been fixed by TT. 

[prtaylor56]

@iamwhoiam 

If you want to feel even worse about this, click on the link below, and spend an hour or so reading the months' worth of user complaints on this, along with the pathetic rationalizations and excuses by TT "experts".  Bottom line, they are dug in and will not fix it.

https://ttlc.intuit.com/questions/4576126-one-of-my-1099-r-amounts-is-not-being-added-to-line-4a-of-...

[iamwhoiam]

Been there and done that....

[RWagner245]

I received an IRS Notice CP2000 which says I owe almost $28,000 in taxes for 2018.  In looking at the information provided by the IRS and looking at my copy of my 2018 Form 1040, it appears that Intuit has left the box on line 4a blank while putting the correct amount in line 4b.  So, bottom line is that due to TurbotTax incompetence, the IRS believes I am hiding income even though I clearly paid taxes on the full amount.  What is the point of using tax software if this is the result???