TurboTax update to 2021 American Rescue Plan

[jzman]

I'm getting the same reject issue.  Why the wait until 4/30/2021 and why no communication from TurboxTax about all these issues? Frustrating!

[DianeW777]

The IRS has provided more guidance for situations with advanced premium tax credit (APTC) and more specifically about those who have already filed their 2020 tax return. They are requesting that no amendment be filed and have listed procedures based on your situation.

• More IRS details about receipt of the advance 2020 PTC

Please update here if you have more questions. @craveking | @thay | @jzman

[jzman]

But since my return was rejected, I now have to wait for TT to update the software before I can even refile it.

[JeffreyR77]

As your return rejected, you should be good to finish preparing your return, 

Your state may not yet have completed it's actions for the unemployment portion of the tax changes occurring this year.   

TurboTax is current with the Federal changes due to the $10,200 unemployment income exclusion and the waiver of repayment of the Premium Tax Credit.

[craveking]

What exactly is the IRS saying about medical expenses being unaffected by the elimination of the APTC? As far as I can tell, nada. The medical.wks file (SCH A 2b) in TT is populated by the 1095A, not the 8962. The 8962 is generated automatically. So, for the hundredth time, is the IRS going to blow off the impact of keeping forgiven APTC in the medical expenses portion of Sch A (lowering AGI by an expense that was forgiven) or are we waiting for more guidance and another TT update to address this?

[jimgarrison]

Regardless of whether or not TT fixes this error, I do not think it’s appropriate to increase medical expenses for the excess premium tax credit that you are no longer paying back. In other words, just under basic tax principles, how can you justify a medical expense deduction for medical expenses that you did not pay?

TT needs to get their act together and get this corrected or indicate why they are not doing so.

[LinaJ2020]

The program has not been completely updated yet.  Our engineering team is in the process of fixing it. 

Here is the issue:

Clients are itemizing with medical expenses and have APTC. The reduction of the APTC isn't reflected on Schedule A for the medical expense deduction. This causes an overstatement in medical premiums paid. If the client isn't itemizing on their federal return, but has entered medical expenses, then watch for how this affects the state return(s).

[craveking]

Great. Thanks. But I’m not sure I understand the last sentence. If the client isn’t itemizing on their fed return, how can they enter medical expenses?

[LinaJ2020]

That means when taxpayers have medical expenses but do not have enough itemized items to itemize.  This might affect their State return.  Every state has different set of rules.  Contact your state for verification.  Click here:  Your state

@craveking

[macuser_22]

"Client" ?   You do know that it is a violation of IRS regulations for a paid preparer to use  self-prepared software like TurboTax.

[bassmaster]

It seems like we're stuck between updates.

If I *need* to file before TTax is updated, would it be appropriate to just override the forgiven APTC amount that shows up in the medical expenses portion of Sch A?  Or is this an oversimplification and could be wrong in some cases?  Will this cause the return to be rejected?

Thanks!

[BillM223]

"If I *need* to file before TTax is updated, would it be appropriate to just override the forgiven APTC amount that shows up in the medical expenses portion of Sch A?  Or is this an oversimplification and could be wrong in some cases?"

In my personal opinion, I doubt this would cause a reject.

As for "Or is this an oversimplification and could be wrong in some cases?", it appears that TurboTax has plans to stop adding the forgiven excess PTC to medical expenses on Schedule A but hasn't done so yet (and, no, I don't have a date for this).

This would appear to be a reasonable inference form the morass of last-minute changes on the Tax Code and IRS guidance. The only thing about doing the override is that it may void the Tax Accuracy Guarantee (if that matters to you this year), and occasionally an override will stop e-filing. I don't know that this one will, however. All you can do is try it.

[thay]

@LinaJ2020 

Thank you.  The software update came through today (desktop version).  The medical expenses now look correct. 

[taxuser21]

[Update - I see the 4/15 update fixed properly, so ignore this workaround]

FWIW, I had similar situation where my excess ATPC is auto-added to medical worksheet as a deductible expense.  I did Itemize, but without paying back excess ATPC, actual medical expenses were below 7.5% threshold.

Here's what I did to successfully efile and have it accepted.

For the last question "List any expense refunded" in the Step-by-Step on Medical Expenses, I put in the number that matched the excess APTC that was forgiven.  (The question said "reimbursed by insurance", but I felt the reimbursement by the IRS was close enough, and the math nets properly.

Also, the Medical Worksheet isn't filed with IRS, it's just used to fill Schedule A, which now has my legit value. Schedule A is the form that is sent to IRS. [I looked at Schedule A, to confirm it was clean and accurate.]

The worksheet has the slightly clerically imprecision of adding ATPC and subtracting it in the other line.  Doing it that way in Step-by-Step, avoided a manual form override that might have had ripples I didn't understand.

YMMV, but it seemed to be a clean workaround for me.

[foolishfrost]

Actually, the software now says during review to NOT send in the tax form until it has been updated.  They are still doing updates to the way the form works, or the IRS is...  Hard to tell.

Either way, it's not finished yet.