C-Corp Form 4626 Alternative Minimum Tax - Corporations. Received a letter from IRS, did not include Form 4626. I cannot find the form in TurboTax. What am I missing?

[Faith C · Accepted solution]

Thank you so much for expressing your concerns. Form 4626 is required to file with a corporation tax return unless a filing exclusion applies.  Based on IRS Form 4626 instruction, taxpapers can choose to apply the safe harbor method (simplified method) if qualified. IRS clarifies rules for new corporate alternative minimum tax generally applies to large corporations with average annual financial statement income exceeding $1 billion. 

If taxpayer qualified for safe harbor method (most corporation may qualify), they can click the "yes" box on Form 1120 Sch K Line 29c to avoid filing Form 4626. 

If you have received an IRS letter regarding this issue, you may file amendment with updated Form 1120 with line 29c box checked yes. Or, you may also respond to IRS letter with Form 4626

We appreciate for your business and continuous support. Please feel free to contact us if you have any further questions. 

[pairahoos]

Unfortunately Turbo Tax automatically populates NO on box 29C of Schedule K.   In the business interview section the user is not asked if the company qualifies as a safe harbor.   There are 2 questions related to Alternative Minimum tax -- but this 3rd crucial question is not asked and the box is automatically populated with the answer NO.    So that is an error in the software.  The first question asks if it is an applicable corporation and the explian this link says "If the average adjusted financial statement income for the three prior years is $1 billion (or $100 million if a foreign-parent multinational group), the corporation is an applicable corporation"

If you answer NO then the next question asks if the corporation is currently applicable because of a prior year. 

However if you answer YES to question the followup question changes to "Does the corporation meet the requirements of safe harbor".

On the face of form 1120 section K questions 29a to c the if then logic is documented and Turbo tax has it WRONG in the PROGRAM.   A NO to 29A is presenting 29B instead of 29C - and it populates row 29C even though the question was never asked.   A  YES to 29A is presenting 29C it is supposed to show 29B and then based on that answer show 29C.   And a NO to 29A is presenting 29B instead of 29C

The PROGRAM LOGIC IS WRONG FOR SCHEDULE K line 29A and NEEDS TO BE FIXED.

Tax form:

29 Corporate Alternative Minimum Tax:
a Was the corporation an applicable corporation under section 59(k)(1) in any prior tax year? . . . . . . . . . . .
If “Yes,” go to question 29b. If “No,” skip to question 29c.
b Is the corporation an applicable corporation under section 59(k)(1) in the current tax year because the corporation was an applicable corporation in the prior tax year? . . . . . . . . . . . . . . . . . . . . . . . . .
If “Yes,” complete and attach Form 4626. If “No,” continue to question 29c.
c Does the corporation meet the requirements of the safe harbor method as provided under section 59(k)(3)(A) for the current tax
year? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If “No,” complete and attach Form 4626. If “Yes,” the corporation is not required to file Form 4626

[pairahoos]

Where is this posted on the sales page that you see when you are comparing products?

[pairahoos]

There is an error in Turbo Taxes Question and Answer programming and it populates the boxes wrong.  Kind of defeats the point of using turbo tax if you have to review each line against the tax code and instruction forms.

[sl244977]

Thank you so much for this article, very helpful!

[CARESBC]

If in fact the replies here represent Intuit Turbo Tax, being rude to users isn't acceptable.

[algrove]

Why let us file an improper 1120 return and then now tell us how to amend our return. For a very small business this is lousy support.

[TahoeJeff]

Apparently if you eFile you'll get the IRS notice that it is missing. I just did, very frustrating to not even have this topic come up in Turbotax

[Mike9241]

was question 29C checked yes on your 1120C. if so, you are telling the IRS you are exempt from filing form 4626. it may be that the IRS computers are not programmed properly so these notices are sent out in error.

Form 4626 is required to file with a corporation tax return unless a filing exclusion applies. Based on IRS Form 4626 instruction, taxpapers can choose to apply the safe harbor method (simplified method) if qualifies. IRS clarifies rules for new corporate alternative minimum tax generally applies to large corporations with average annual financial statement income exceeding $1 billion.

If taxpayer qualified for safe harbor method (most corporation may qualify), they can click the "yes" box on Form 1120 Sch K Line 29c to avoid filing Form 4626.

if you are exempt you can respond to the notice by saying you used the safe harbor simplified method and therefore are exempt from filing or you can submit form 4626

[TahoeJeff]

Right, and its a new form. I called the IRS but of course got dropped while she was looking at my company account. TurboTax (and I) did not get that marked correctly, someone else posted that their Q&A on that was in error. I didn't notice it but yes, the safe harbor should apply here and the new rules brought that $1b down to $500m. Much higher than my little Corp. Thanks for the reply

[trevor1]

I found this thread very helpful, thanks everyone.

For future victims, here's some guidance, at least for 2023 taxes (I'm guessing it will be fixed for 2024).

I received a letter from IRS saying "Form 4626...was... not attached or incomplete. Complete...all...of...4626."

Look at your Form 1120, Schedule K, line 29 (thanks to the person who figure this out). I found that Turbo Tax (TT) marked/checked my 29a, 29b, and 29c all as NO. For any business with less than $100,000,000-$1B income (and no groups of corporations etc.), they should probably be NO, BLANK, and YES. If 29c is NO, you need to fill out Form 4626. If 29c is YES, you are exempt from 4626. There are clear bugs in TT here: if 29a is NO, TT should always leave 29b blank but doesn't. The step-by-step process of TT asks for your information that controls 29a but not into 29c.

You can send a 4626 to the IRS but it's quite complex. I elected to submit a 1120X amended return to the IRS. I decided this because it seemed somewhat easier to me than figuring out 4626 and because I was a little concerned if I submitted 4626 for 2023 I might need to do it for 2024, 2025, 2026... Note that IRS publications suggest IRS might take many months to process an amended return, which would probably delay a refund.

You amend a return by restarting TT and selecting Amend a Return near the start. Go to Forms view, 1120 pages 3-6 and manually change the answers for question 29a, 29b, and 29c, to NO, BLANK, and YES (in most cases). TT will give you a box to explain the changes, I wrote:

"1120 Sch K line 29b, changed from NO to LEFT BLANK, Turbo Tax erroneously entered NO against the explicit IRS directions in line 29a.

"1120 Sch K line 29c, changed from NO to YES, Turbo Tax erroneously entered NO; TT did not ask us for any information about this very complex issue before electing to enter NO.

Due to the 29c error above, we received IRS letter number XXXXX asking us to submit IRS form 4626. After 29c is corrected , 4626 is no longer required and we are not sending it to IRS."

Then submit your 1120X (2 pages) and corrected Schedule K of Form 1120 (2 pages) to the original IRS address you used for your original return. 

Separately, I sent a reply to the IRS letter saying:

"After reviewing the IRS letter referenced above, I have filed an amended 1120 return via US Postal Service certified mail to Internal Revenue Service, Ogden UT [removed]. I have attached copies of the amended return and the [NUMBER OF THE IRS LETTER] letter.

In form 1120, Schedule K of the original return, line 29b was erroneously answered NO and line 29c was erroneously answered NO.

On the amended return, line 29b is now correctly LEFT BLANK and line 29c is correctly answered YES. Because line 29c is YES, “the corporation is not required to file Form 4626.” I am therefore disregarding the directions in the IRS letter and am not sending 4626 with this letter.

The Corporation is a very small company and has an income a tiny fraction of the thresholds for requiring Form 4626. I relied on Intuit Turbo Tax to produce the return. Turbo Tax has a very clear bug in that it produced a return with NO on line 29b when the explicit IRS instructions for line 29a say that line 29b should be skipped (LEFT BLANK) under the circumstances in the return. Turbo Tax has a less clear bug in that it did not ask for any information to determine if it should answer YES or NO on line 29c. Line 29 does not appear prior to tax year 2023 and refers to an extremely complex issue.

I found this website slightly useful in attempting to understand the situation:

https://ttlc.intuit.com/community/taxes/discussion/c-corp-form-4626-alternative-minimum-tax-corporat...

I believe these actions satisfy the requirements of the letter. Please contact me if you require further action on my part."

I guess this is not doing exactly what the IRS letter says (send a 4626) but it seems appropriate to me. I hope it works.

Question 29 is new for tax year 2023, it doesn't appear in 2022 or earlier. I interpret it as an attempt to suppress tax avoidance by very large corporations. Virtually no company who would use Turbo Tax would have the income level to trigger the need to submit 4626.

I'm really angry with Turbo Tax about this, it wasted a day of my time. They've probably caused at least 100,000 companies to need to spend 4-10 hours dealing with this, a cumulative wasted time value of very roughly $50M.

I am guessing at least this will be fixed in the 2024 version of TT.

[TahoeJeff]

Yes I did the same. Far easier to amend w/ 1120X if you have a smaller company that meets the safe harbor rules. I did also call the IRS and let them know I was sending back a full 1120X amended return, not the 4626, and told them I thought many may have been caught by this oversight. All sounded good.

[trevor1]

There are several threads about the Form 4626 problem. I suggest new victims go here: https://ttlc.intuit.com/turbotax-support/en-us/help-search?advanced=false&allow_punctuation=false&fi...

and search for “4626” then read the various threads. This is clearly a serious error in the 2023 version of Turbo Tax for Business. I will guess it is sufficiently serious that Turbo Tax will take the trouble to fix it for the 2024 version.

[trevor1]

The original post in this thread has 15472 views as of Nov 27, 2024, so this problems is apparently affecting at least about 10000 people who found this thread, plus a large number of others who haven't yet found this thread. If anyone contacts a person at Turbo Tax, please tell them this is a very serious, very widespread problem (e.g., 15472 views) and Turbo Tax should devote urgent effort to solving it, should interface with their high-level contacts at the IRS to explain the issue and devise a recovery plan, and should inform Turbo Tax for Business customers how they should handle the IRS letters a huge number of the customers are apparently receiving.

[Mike9241]

how did you answer question 29c on the 1120

if "no" then 4626 is required if "yes" not required

however, it may be that the 4626 instructions conflict the the 1120 questions

4626 part 1 line 8/9 seem to require it 

so this may be a situation where the IRS doesn't understand its own rules and is issuing the notices improperly.

Based on IRS Form 4626 instructions, taxpayers can choose to apply the safe harbor method (simplified method) if qualified. IRS clarifies the rules for the new corporate alternative minimum tax generally applies to large corporations with average annual financial statement income exceeding $1 billion. (Under $1B and safe harbor elected no filing required) 

If the corporation qualifies for the safe harbor method (most corporations using Turbotax business probably qualify), they can click the "yes" box on Form 1120 Sch K Line 29c to avoid filing Form 4626.

if you checked yes to 29c and qualify, which is likely, then the IRS should never have issued the notice. I admit I'm guessing but I think very few Turbotax 1120 filers would need to file. 

irs 4626 webpage - see the special rules section

https://www.irs.gov/instructions/i4626#en_US_2023_publink1000124757 
If you have received an IRS letter regarding this issue, you may 1) file an amended 1120 with line 29c box checked yes. if you qualify or, 2) you may also respond to IRS letter with Form 4626 o, 3) respond with a signed and dated note that you qualify for the safe harbor and had checked question 29c yes, and therefore are exempt from filing.