Turbotax not accurately calculating income on a multi-state return for RI & MA

[rjpdld]

ISSUE:  Turbotax is accurately computing RI income and tax on a full-time non-resident return.  However, TurboTax is not accurately carrying from a 2024 RI non-resident return, Schedule II, column A, line 12 the amount of Modified Federal AGI allocated to RI sources to MA 2024 Schedule OJC “Amount of Income on which you paid taxes”.  Specifically, the amount of income shown on Schedule OJC does not include the amount from RI Schedule II, line 9, Column A, Adjustments to AGI from Federal form 1040, line 10.  Therefore, the MA return overstates the amount of income earned in and tax paid to RI which understates the amount of income allocated to MA and the amount of income tax due to MA.

EXPLANATION:  I am filing for my wife and me a multi-state return – Rhode Island as a full-time non-resident and Massachusetts as a full-time resident.  We are filing MFJ status.  All of my income is MA income.  My wife earns all of her income in RI, some of it W-2, the rest reported on form 1099-NEC.   She has limited Schedule C expenses (i.e., not a business loss) and receives a self-employment tax deduction reported on Form 1040, Schedule 1, line 15 which gets carried to Form 1040, Schedule 1, line 26. 

Per the 2024 INSTRUCTIONS FOR FILING RI-1040NR for RI Schedule II, line 9, Column A – Adjustments, “Enter amount from Federal Form 1040, Federal Form 1040-SR, or Federal Form 1040-NR, Schedule 1, line 26 applicable to Rhode Island income.”  Since all the 1099-NEC income was earned in RI from a RI source, all the self-employment tax deductible from federal income is also a deduction from RI income on Schedule II.  This amount gets entered to Turbotax on the ‘Rhode Island adjustments to income’ entry screen and is accurately reflected on RI Schedule II.  However, the same amount as the deductible part of self-employment tax is added back to RI income when the amount of income shown on RI Schedule II, column A, line 12 gets carried over to MA Schedule OJC.

[BrittanyS]

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)

[rjpdld]

Because I transmitted my returns, the Tax Tools menu is no longer available to me when I log on.  Have you got another way to achieve the same objective?  

If you have a test environment or sandbox available to you, you should be able to easily replicate this issue.  Enter a 1099-NEC with, say $50,00 of income in RI for a non-resident.  Create a Schedule C with $1,000 of business expenses.  I don't even think you need to have any MA income but you can create whatever MA resident income you want.  In my case, all of our MA income is 1099-R and SSA 1099 income.  Verify on the federal return that you pay self-employment taxes on the 1099-NEC income of which 50% should be deductible on Schedule 1.  Create A RI return and be sure to enter the deductible SE taxes as an adjustment or modification to the RI income.  Then create a MA return and verify the MA income is correct. If you look at the MA Form OJC, the income earned in another jurisdiction will not be the same as on RI Schedule II, line 9, Column A, Adjustments to AGI from Federal Form 1040, line 10.

[rjpdld]

Hi BrittanyS,

Do you have anything for me regarding my last response about not being able to access a diagnostic file following the directions you provided?  

[BrittanyS]

I'm not able to recreate the same issue you getting in TurboTax.  One way to open up Tax Tools in TurboTax after you have submitted your return is to do the following:

1. Select State
2. Select Add State (you will not actually add a state, this just allows tax tools to be accessed)

Then follow the steps to send the diagnostic code:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)

@rjpdld 

[rjpdld]

BrittanyS:

Your previous instructions are:

Select State Select Add State (you will not actually add a state, this just allows tax tools to be accessed)

Then follow the steps to send the diagnostic code

I cannot see a menu or anything resembling "Select State".  I am guessing I must first select the option to Amend my return to select a new state see "Select State" and the instructions you originally provided about sending you a file with personal information deleted.  I am not eager to do so since that might open up another full can of worms.   If you send me an address, I can print out the return, redact the personal information, and mail it to you.  

[DianeW777]

Yes, follow the instructions below to begin your amendment and add a state.

• How do I amend my state tax return? 

If you want to make changes or add a document to a tax return that has already been filed and accepted by the taxing agency, you should follow these guidelines. 

• You must first wait until the initial return is completely processed.
• You will have to use the same TurboTax account that you used for the original tax return.
• Once you begin your amendment, you'll see your original return.
• The refund calculator will start new at $0 and only reflect the changes in the refund or tax due
• Only make changes to the areas of your return that need to be corrected.
• You have three years from the date you filed your return or two years after you paid the tax due (whichever is later) to file an amendment

Select your product below and follow the instructions. 

Amend TurboTax Online 

Amend TurboTax Desktop 

@rjpdld