Form 2210 TY 2021 error

[kevinandlori]

TurboTax is still not correctly calculating the following on Form 2210 as of 2/26/2021:

1. The tax computations on schedule AI, line 14 column (a), (b), and (c) are incorrect if you have qualified dividends. Specifically, on my return Turbotax is incorrectly applying exactly a -12% tax rate to my qualified dividends when it should be a +15% tax rate. This error results in estimated quarterly taxes that are lower than they should be by 27% of qualified dividend income.

2. IRS instructions for Form 2210, Line 11 state "Any overpayment from your 2020 return applies to your 2021 estimated tax payments. Generally, treat the payment as made on April 15, 2021." Instead Turbotax incorrectly fails to apply the prior year refund to any quarter in Form 2210. 

3. Line 7 schedule AI incorrectly excludes amounts on line 12(b) of form 1040. However, Turbotax does implicitly include the amount on line 12(b) in the estimated tax calculation.

As of Feb 22, the following appear to be fixed:

FIXED: When using the annualized installment method, line 10 column (a) in part 3 of form 2210 is supposed to be equal to schedule AI line 27 column (a). Instead, it was equal to line 27 column (a) + line 27 column (b).

FIXED: Self-employment tax on line 15 of schedule AI was incorrectly also included in line 16, resulting in a double-counting of self-employment tax and a line 17 column (d) total tax that incorrectly exceeds the total tax shown on form 1040 line 24.

[detest-heretic-h]

Feb 26th,  18:37 EST

Been on the phone with TT Customer Support asking them to confirm what was corrected and what issues remain.  Twenty minute wait now while the issue is being researched.  I am told only that the issue was to have been resolved on 25 Feb, yesterday.  Did a quick review and and I did not see any correction - guess I will calculate this by hand.  Which begs the question, why use TT?

[detest-heretic-h]

Carissa:

When we contact your customer support by phone, the support individual is unaware of the problem.  Just spend a half hour on the phone with TT.

[Tax4fp]

With respect to Form 2210 AI line 14 calculations, I can confirm that the calculations for at least columns (a) and (b) are wrong for me.  I ran some tests with a spreadsheet and it appears that line 14, box (a) is incorrectly calculating the tax effect of LT cap gains and Qual div.  To do the calculation, the actual CG/QD for each period have to be multiplied by the appropriate scaling factor for the period (should be 4 for box (a)).  The correct tax calculation would then add 15% of this value to the tax calculated for the total taxable income less the CG/QD income to provide the total tax for that period in box (a).  In my case, it appears that TT is incorrectly using the factor for box (b) (factor of 2.4) instead of the correct factor of 4 for box (a) for this calculation.  This appears to be a carryover of the 2020 calculation which combined income from the first two periods to assess underpayment penalties.  Box (b) also appears to have used the wrong factor (possibly the third period factor of 1.5) which also resulted in a significantly higher number in box 14 (b) than it should if the calculation was done correctly.  There may be other explanations for the bad numbers in line 14 (a)- (c), but since previous problems with line 10, box (a) were also the result of carrying over the 2020 Form 2210 calculation, the use of improper scaling factors seems more likely than changing 15% to -12%.

Also I would note that the manual TT update download page/file hasn't been updated for 3 days (since 2/24). This confirms that TT hasn't yet provided the Form 2210 update that was supposed to be issued on 2/25/22 to fix errors in Form 2210 that several of us were told would be issued to allow us to refile our rejected returns

[Xuser]

Regarding Line 14, you may not be doing your hand calculation correctly. If you have qualified dividends and capital gains, here's a simplified example. The instructions for 2210 have a Qualified Dividends and Capital Gain Tax Worksheet, which is a modified version of the Qualified Dividends and Capital Gain Tax Worksheet used for your 1040. Assume you're filing single and Schedule AI Line 13a is $50,000, which includes $1,000 of qualified dividends. The $1,000 was entered in the program as $250 for 1/1 - 3/31. Look up $49,000 in the tax tables ($6,634 tax) and add 15% x $1,000 ($150) for a total tax of $6,784. Assume Schedule AI Line 13b is $52,000, which includes $2,400 of qualified dividends. The $2,400 was entered as $1000 for 1/1 - 5/31. Look up $49,600 in the tax tables ($6,655 tax) and add 15% x $2,400 ($360) for a total tax of $7,015. 

[Tax4fp]

With respect to Form 2210 AI line 14 calculations,  I ran some tests with a spreadsheet using the correct IRS worksheets and it appears  that TT is incorrectly using the second period factor (2.4) instead of the correct factor of 4 for box (a) in their 2021 Form 2210 calculation.  This appears to be a carryover of the 2020 calculation which combined income from the first two periods to assess underpayment penalties and would have used the column (b) factor.  Line 14 Box (b) also appears to have used the wrong factor which also resulted in a significantly higher number in box 14 (b) than it should if the calculation was done correctly per the Pub 505  IRS worksheets.  There may be other explanations for the bad numbers in line 14 (a)- (c), but since previous problems with 2021 Form 2210  line 10, box (a) were also the result of carrying over the 2020 Form 2210 calculation, it could be that line 14 is messed up in a similar way.  To  check if my spreadsheet was correctly implementing the IRS worksheet I went back to 2019 TT Form 2210 and compared what it calculated in line 14 to what my spreadsheet predicted for that year and they matched in all periods.

[Xuser]

I see no problems with the Form 2210 AI line 14 tax calculations. 

[Tax4fp]

@Xuser , perhaps you didn't have significant capital gains and/or qualified dividends that would distort the calculation in a noticeable way in line 14, boxes (a)-(c), but I did, and I know it isn't calculating those correctly for me and others, at least not in the 2021 TT version that I have that was last updated on 2/24/22.

[Tax4fp]

TT update on 3/3/22 did not fix any of the errors in Form 2210.  Still not calculating line 14 (a)-(c) on Form 2210AI correctly and still using the wrong dates in step by step for annualizing withholding.  2021 TT Form 22210 is a piece of junk that TT isn't making any effort to fix and TT 100% accuracy guarantee isn't worth anything so they don't even try.

[Tax4fp]

Even though the 3/3/22 TT update didn't correct any of the errors in multiple lines of Form 2210, it did something so that IRS now accepts the return.  Since both the correct and incorrect Form 2210 numbers showed that I didn't owe any underpayment penalty, I just let it go through and annotated my copy of printed return to highlight the errors in case the IRS ever questions the return.  2021 TT Form 2210 is still an error filled piece of junk and I'll use something else next year because they don't seem to care to issue a quality product.

[babyrd55]

Similar here, but I was also able to efile over the past weekend. Seems like IRS doesn't care as long as the penalty is correctly computed to zero.

[steve17]

I can confirm the error on Line 14 of Form 2210AI.

A simple example for Column 1:

Line 13 = 50006

Line E in smart worksheet = 7000

Looking in Tax Tables: (MFJ)

    Tax on Line 13 = 5605

    Tax on (Line 13 - Line E) + 15% of Line E = 5806

The REAL answer should be between 5605 and 5806

but appears as 2245!  OOPS! And if overridden, form may not be e-filed!

[steve17]

The first problem you raise is probably due to the patch in the previous year when there were no Q2 payments required and they were rolled into the Q3.

[Xuser]

Steve17,

Thank you for providing numbers. You and many others are figuring the tax incorrectly and then saying others on the forum don't understand. From your example regarding Form 2210AI Line 14.

Your example:

A simple example for Column (a):

Line 13 = 50006

Line E Column (a) in smart worksheet = 7000

Looking in Tax Tables: (MFJ)

    Tax on (Line 13 - Line E) + 15% of Line E = 5806

The REAL answer should be between 5605 and 5806

but appears as 2245!  OOPS! And if overridden, form may not be e-filed!

The tax on the non-dividend portion of Line 13 is $2,245. If you had $7,000 in dividends through 3/31, the annualized dividend (per IRS and TurboTax) would be $28,000. $50,006 - $28,000 = $22,006. That is the value to look up in the tax table.

Tax on annualized $28,000 dividend = $0. Since annualized income (Line 13) is <$80,800, all of the dividends through 3/31 are taxed at 0%.

Total tax Line 14 Column (a) = $2,245 + $0 or $2,245.

Everybody please stop propagating that the tax calculation on Line 14 is incorrect when you aren't versed in the calculation. Also, for those who are "adjusting" their entries for Schedule AI Line 1 and their entries for dividends and capitals gains to make the answer what they think it should be, you will have to defend that in an IRS audit. The IRS doesn't have those numbers, but they can request supporting documentation during an audit. Are we good here?

[steve17]

In my own defense, I'll say that I contacted TurboTax THREE times asking how this was computed and they were unable to provide an answer. At least one of the calls went up to a technical specialist level!

Thanks for your clarification.