Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[MB60622]

I am having the same problem with the refinance and incorrect calculation of average loan balances where TT is adding the balances not looking at the average balance.  TT any update on when this will be fixed???

[42Amy1]

Same problem...hours and hours trying to work around it. I like your answer and will do my own calculations to come up with the correct single deduction.  Only issue is the IRS will see the two 1098s we got for original loan and the refinanced one from same lender.  How do we get around that? and which date to use for box 2?  It seems like this should have been a simple situation but TT has turned it into a massive broken mess.  

[42Amy1]

good idea!

[Rosebud99]

Anyone else test the waters in the Home Mtg Interest section after  applying today’s update?

While I noticed some minor changes (I think) to the instructions in the first screen of the U/I for Home Mtg Interest having to do with Refi’s and how to enter 1098s (by combining them as per their prior version), when I gave it a quick run through it doesn’t look that different in the backend - when one goes to the DEDUCTIBLE HOME MORTGAGE INTEREST Wks, it still appears wrong in my case and incorrectly limits my interest deduction.  Full disclosure I am entering all of the 1099’s I’ve received from lenders - not following the TT workaround instructions to “Combine them onto a single entery” for all refi’s.  As I have previously said, I am hesitant to create red flags when none should exist. 

BTW - I called the TT customer support number yesterday (20 minutes on hold) to see what they could tell me regarding this situation.  I got the impression that I had been wasing my time on this forum - the Rep I talked to “Jeremy” was very helpful, but could find no referrence in their call center database about this problem.  We did a screen share highlighting my problems as well as the numerous comments left by many of us since January 9th.  He assured me that it would get more attention now - but I was not confident as they were pushing this update out to enable customers to start filing wihtin days…

My recommendation for what it’s worth, is that this forum is not actively monitored and does not have the resources behind it to properly elevate a serious problem like this within the TT organization.   Proceed with caution - and call their Customer Service line to raise a stink.  

This is still not worthy of a professionally produced software package to handle Mortgage Interest et al.

[dhagen]

Hmmm. I'm not sure that the TT rep, "Jeremy", was being upfront with you about never hearing about the mortgage interest problem, or else the database of TT's customer service logs is in terrible shape.

From Jan 31-Feb 4, I was in daily contact with a TT enrolled agent about this exact issue concerning the handling of mortgage interest deductions for loans refinanced in 2020. He completely understand the problem I was facing and could replicate the problem when he created a return. (TT prevents me from posting the case number here.)

My case was closed because the TT workaround (of combining all 1098's into one 1098 on TT) did work to correctly report my mortgage interest paid on Schedule A. Nonetheless, I asked the enrolled agent to escalate the situation within programing. He agreed that a programing revision was needed and said he would escalate the problem to his manager. So, why couldn't Jeremy find this case?

BTW: The latest TT recommendation for reporting amortized points on a 2020 refinance loan also worked for me. They recommend creating a second 1098 within TT, declare 0 interest, etc., and then on the next screen enter your data re points. This did result in the correct amount of amortized points appearing on my Schedule A.

The big question for me is about e-filing.

Does the IRS receive only the Schedule A or does e-filing include all of the supporting worksheets? If only Schedule A is filed (as one would if mailing a paper return), then the above lame workarounds won't matter. The mortgage interest total on Schedule A will equal the total interest reported to the IRS on multiple 1098s. 

But if the IRS sees evidence of these weird workarounds, do we end up being audited?

[dhagen]

Hmmm. I'm not sure that the TT rep, "Jeremy", was being upfront with you about never hearing about the mortgage interest problem, or else the database of TT's customer service logs is in terrible shape.

From Jan 31-Feb 4, I was in daily contact with a TT enrolled agent about this exact issue concerning the handling of mortgage interest deductions for loans refinanced in 2020. He completely understand the problem I was facing and could replicate the problem when he created a return. (TT prevents me from posting the case number here - I've tried multiple times.)

My case was closed because the TT workaround (of combining all 1098's into one 1098 on TT) did work to correctly report my mortgage interest paid on Schedule A. Nonetheless, I asked the enrolled agent to escalate the situation within programing. He agreed that a programing revision was needed and said he would escalate the problem to his manager. So, why couldn't Jeremy find this case?

BTW: The latest TT recommendation for reporting amortized points on a 2020 refinance loan also worked for me. They recommend creating a second 1098 within TT, declare 0 interest, etc., and then on the next screen enter your data re points. This did result in the correct amount of amortized points appearing on my Schedule A.

The big question for me is about e-filing.

Does the IRS receive only the Schedule A or does e-filing include all of the supporting worksheets? If only Schedule A is filed (as one would if mailing a paper return), then the above lame workarounds won't matter. The mortgage interest total on Schedule A will equal the total interest reported to the IRS on multiple 1098s. 

But if the IRS sees evidence of these weird workarounds, do we end up being audited?

[LinaJ2020]

The IRS only receives the Schedule A, not the worksheets. 

You do not need to attach any worksheets to your tax return when you e-file.  If you are itemizing, only the Schedule A will be sent to the IRS.  However, you should keep all your paper work including all the Form 1098's and worksheets in a place where you can easily find to present when IRS contacts you for proof.

Also note that your mortgage interest might not change your total tax refund.  It will only change if your total itemized deductions including the mortgage interest exceeds your standard deduction.  In the TurboTax program, when you enter itemized deductions such as mortgage interest, property taxes, medical expenses, charitable contributions, all of these items are added together. Unless the total of itemized deductions exceeds the standard deduction for your filing status, you would not see any change in tax due or refund.  

@dhagen

[onevandal]

The update that was released today still did not fix the problem.

Since this has still not been fixed, it seems the easiest solution is to...

- Add up interest from all 1098s.

- Enter them as one 1098. It will give you the correct deduction amount.

The total amount will be entered into Schedule A. The worksheets are for your records and will not be sent. If for some reason you were audited (for any reason) you have the 1098s that, when added up, equal the amount you entered into Schedule A.

I'm going to give it another week and then am filing that way.

[LinaJ2020]

If you have more than one 1098 form, I will recommend you to combine all 1098 forms and enter as one. I am attaching a TurboTax link for the instructions how to do claim your mortgage interests.  Click here:

Multiple Form 1098s

For tax years prior to 2018, your mortgage interest deduction is generally limited if all mortgages used to buy, construct, or improve your first home (and second home if applicable) total more than $1 million ($500,000 if you use married filing separately status). Beginning in 2018, this limit is lowered to $750,000.  For more information about the mortgage interest deductions, click here: Mortgage Interest deduction

[Mikemcna]

I’m not convinced this is a complete solution.

Example:

Mortgage one entered into before 2020.  Approx balance $680,000.  Interest $29,000 for 2020.  Mortgage interest rate 4.25%.  Taxpayer intends to sell this property and has it listed for sale.

Mortgage two entered into September 2020.  Approx balance $475,000.  Interest $1500 for 2020.  Mortgage interest rate 2.75%.  This is a new property, which the taxpayer intends to move into in early 2021.

Adding them together will yield a balance well over the $750,000 limit, and a substantial amount of interest expense will not be deductible.  In fact, the interest deduction will be less than the $29,000 on the old mortgage.

Using the IRS-allowed average interest method of determining the balances, the first mortgage will be about $680,000 ($29,000 divided by .0425).  The same method results in a balance of $55,000 for the second mortgage (because it was only in place for 3.5 months and only one payment was made in the calendar year).  The two together total $735,000, below the limit and thus the total interest from both mortgages is deductible.

I don’t see the TT “fix” leading to the correct outcome; instead the user must override TT forms/schedules, having done the calculations off-line, to get the correct outcome.

[dhagen]

 LinaJ2020 -

Could you explain what your label means?

"Expert"

"Employee Tax Expert"

Are you an employee of TurboTax?

I've seen these same labels associated with other users.

Thanks

[nichojo6]

Folks, its clear this is something TT may not fix in time. For the downloaded MacOS version, the Tax and Interest Worksheet (that populates the Mortgage field (Schedule A, Line 8a)) remains a User Entry field.

Since TT reports only the Schedule A to the IRS, and none of the worksheets or 1098 info we enter accompanies the filing, I suggest you all calculate your interest deduction based upon one of the two or three ways mentioned in this thread. Enter this amount in the Tax & Int Worksheet/Mortgage Interest Limited Worksheet. It will be reflected on your Schedule A. For those of you worried about audit flags, keep in mind that what you enter will be substantially less than the sum of all those 1098s reported directly to the IRS (assuming you calculated correctly), so most likely SWAT teams will not be arriving at your home.

[mrdata08]

Same problem here - TurboTax people: Please fix this.

I can't believe correcting this bug could possibly take this long.

[Monsterdaddy]

I believe LinaJ2020's solution will work with some clarifications.  When she mentions to combine all the 1098 forms I would just combine ONLY the interest paid.  You can probably just ignore the rest and enter nothing for all the other fields.

The only issue would be if the paid mortgage(s) had points, then you may need to enter a 1098 for each of them to get the deduction for points.  Then you could probably get away with my ghetto solution I had proposed before -- just enter zeroes for balances.

[HoJo1982]

@Katie_B, it's been six weeks since some of us flagged this to TurboTax. This would seem to be a critical fix given how many taxpayers refinanced in 2020. Will this be rectified soon or do we all have to threaten to demand a refund and switch to a competitor? We would greatly appreciate some form of an update. Thanks much.