2021 Form 2210 Calculation Error

[Tax4fp]

@kevinandlori 

I disagree with your statements about line 14 that indicate that TT assuming CG are one time events and not scaling 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.  So 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. 

[artg]

The comments in this thread have been very thoughtful and well researched.  In fact, the comments have given me pause and essentially forced me to ask: What are we paying for?  I buy Turbotax (TT) Premier every year for one reason.  That reason is: Confidence.  When I say “confidence” I mean confidence that the calculations (coding) are accurate and reflect IRS policy.  In plain English, I don’t want to review an IRS publication myself, I’m paying TT to do that for me.  In terms of 2021, TT tells me I have an Estimated Tax Penalty of $10 and I don’t need to file a 2210.  That tells me that based on our overpayment of 2020 (applied to our 2021 return) plus the estimated payment we made in 2021 we got it close.  Last week I generated an “alternate” tax file just to see how the AI in form 2210 was working and it’s not.  What’s scary is I’m getting a little used to this…I’m also a Quicken user that’s gone through significant misery the last three months due to my financial institution changing the way it interfaces with Quicken.  Sorry, this is the TT (and not the Quicken) Community.  Please share your thoughts as I benefit greatly from the insight of my fellow TT users.

[MJK6]

Quicken was sold off by Intuit in 2016. So while you may have issues with it, also, it is a completely separate entity. 

[artg]

@MJK6 

You're absolutely correct, Quicken was sold off by Intuit several years ago and it's a completely separate issue.  My point was that I'm getting a little numb when it comes to our personal financial management and tax software applications letting us down in terms of confidence and reliability. 

Just my opinion...the folks who post on this community (as well as Quicken's Community) have learned over years (if not decades) to depend on these applications.  In many cases we do both short and long term planning based on the output of these applications and when they fail us it's not a good day.  

[knutsenm]

> Was this a rejection by TurboTax prior to sending, or a rejection by the Fed after sending?

A rejection by the IRS, on 24th Feb. I waited until today (6th Mar) to try again, and the return was accepted within minutes; whew.

No penalty owed in my case, but I had to go through Form 2210 to convince TurboTax of that. No special circumstances regarding the outstanding bugs mentioned in this thread in my case, either; so I can't speak to that.

[Tax4fp]

There is a way to get 2021 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.

[timforsync]

Another week passed, still not fixed yet :( 

[MJK6]

@timforsync Not only that, the updater hung and I had to reinstall Turbotax.

[Tax4fp]

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 the issue with line 11 not crediting prior year refund as a tax payment.  In lieu of including 2020 refund as a tax payment credited to 2021 tax return, 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.  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 by the amount of the 2020 refund  (via the fifth estimated payment tweak) in the appropriate period when the 2020 return was filed which should eliminate the bogus underpayment penalty due to TT error on this line.

[artg]

A couple of weeks ago I said I was going to take my underpayment penalty of $10 and not file the 2210.  So, of course, given the update this morning I've got to take another try at AI on Form 2210.  I got the same $10 penalty.  Actually, that makes perfect sense given I underpaid my 2021 liability after I account for the 2020 overpayment applied to 2021, estimated payments and my withholding.  Line 33 of my 1040-SR is accurate to the penny; therefore, I'll pay the $10 penalty and conclude it is what it is.  

What's more troubling about this (fantastic) thread is that we're about one-third of the way through the month of March and we don't have confidence in the TT application.  If this were January, I wouldn't be posting this input.  But we're in March and I'm reading suggestions about "work arounds" to account for the 2020 refund by essentially adding a fifth estimated payment.  I applaud @Tax4fp but we just shouldn't have to be doing this when we're a little over five weeks away from filing.  This is the time of tax filing season when I'm simply waiting for corrected 1099's from my brokerage, not waiting for the next TT update. 

[RRArtie]

Bits and pieces of my thought process:

I file a 1041 using Turbo Tax Business and it appears that capital gains are not annualized in that 2210 calculation either. At least TT is  consistently wrong. I had no penalty and filed with the wrong numbers on 2210AI. My rational is that if the scaled capital gains were entered my overpayment would have been higher and IRS is not going to chase me for no monetary gain on their part.

I said I was going to use some other software next year. While I was waiting for a TT fix, I shopped for some other software. I went to the large online merchant's site and read reviews. One package that I was interested in (I need 1040 and 1041) had reviews that said they nickeled and dimed you to death - you  want a printed return that cost more. Stopped looking at that package. Bought a package that would do my 1041 and 1040 in the same purchase. I installed, and entered my 1040 information. This package didn't even ask about capital gains and qualified dividends for the 2210AI, didn't have the expected taxable portion of the IRA withdrawal, and didn't handle 199A deduction coming from my K-1 (said I needed professional help). Lesson learned - I will not switch. TT in spite of its problems is the most complete and helpful package for me and others with complex taxes (IMHO).

I finally got impatient and filed my 1040 return. With the capital gains not annualized I didn't owe a penalty and felt safe filing with a slightly higher quarterly tax calculation on the 2210AI.

Work arounds: Had I owed a penalty, I would have used some of the work arounds suggested in this forum. I could have included capital gains in the qualified dividends number which is scaled. Or better yet scaled the capital gains before I entered them in the turbo tax interview boxes. Multiplied first quarter capital gains by 4 (or 6 for the 2210AI of the 1041), etc. 

Hopefully this time next year TT will have fixed these problems.

[BG1914]

Has this issue been resolved successfully?  

[wmpyoungx]

Tax4fp, I am not having a problem with Line 11, as you are experiencing. The timing of credit of the overpayment from 2020 applied to 2021 was initially an enigma.  I had this situation: did not use the annualized income method; did check Part II, Box D (treat income tax withheld on actaual dates withheld instead of the default equal apportionment of annual withholding tax method); paid $300 with 2020 Form 4868 extention timely filed on 15 May 2021; 2020 overpayment of $350 applied to 2021 (i.e., no actual refund payment). TT applied the overpayment of $350 as an estimated payment based on guidance provided by the IRS in 2021 Form 2210 Instuctions, as follows:

First quarter due 15 April 2021 - $50. [I expected that the entire $350 would be treated as a payment on April 15, 2021. But, TT followed what is now my understanding of the IRS position. That is, because the $300 extension payment was made on May 15, 2021, $300 of the $350 overpayment was attributable to a payment made after April 15, 2021, and must be treated as a estmated tax payment made on May 15 in the second quarter. Thus, only $50 of the 2020 overpayment applied to 2021 was treated as an estimated payment paid within the first installment period ended April 15, 2021.]

Second quarter due 15 June 2021 - $300. [As explained above]

To obtain the above result, I went back to the relevant TT step-by-step worksheets and re-entered 2021 tax payments. Voila!

Good luck.

[Tax4fp]

@wmpyoungx 

Not sure how you got 2021 TT Form 2210 line 11 to properly credit 2020 over payment, when others are finding it doesn't.  I actually didn't have the problem myself, but tested various options with a dummy tax file to try to help others who were.  When I enter an over payment for 2020 as credit for 2021 using either step by step or forms in my test file, it shows up in line 6 of Tax Payment Worksheet and reduces my overall tax bill for 2021, but never changes Form 2210 line 11.  Net result is that total taxes paid (WH + EST + Carryover) in Tax Payments Worksheet is higher by the amount of carryover than the sum of all 4 periods in Form 2210 line 11, which is the issue that multiple other users are reporting.  The only way that I can get line 11 to include the carryover is by entering as extra estimated tax payment(s) (even though the step by step says not to do this) because entering the carryover in the correct section of TT doesn't work.  When I look at the IRS instructions for Form 2210, it is clear that IRS expects the 2020 over payment amount to be credited as an estimated tax payment in the appropriate period(s), but 2021 TT isn't doing this for multiple TT Community users.  That is why I suggested my tweak to force TT to correctly calculate line 11 by turning the 2020 over payment in to an extra estimated tax payment in the correct period(s) so that TT wouldn't calculate wrong underpayment penalty.

[wmpyoungx]

Thanks. I am using Deluxe CD version. Don't know why users with different versions with nearly identical tax situations experirience different results? TT should investigate. 

Based on your impressive responses, you must have a professional tax background, as I did. This TT product is so much more valuable if you understand what the answers should be. I know from respnses in this thread that people value your input, as I do.