Request for Refund of Penalties and Interest Due to TurboTax Calculation Error

[jjon12346]

Dear TurboTax Support / Audit Assistance Team,

I am writing to request a refund for penalties and interest I incurred due to what appears to be a calculation error in the TurboTax software regarding my First-Time Homebuyer Credit repayment.

I originally received a $7,500 First-Time Homebuyer Credit in 2008 and have been making the required repayments since 2010. By the end of 2021, I had paid a total of $6,000. Beginning in 2022, TurboTax’s repayment calculation appears to have been incorrect, resulting in underpayments and subsequent IRS penalties:

• 2022: Paid $467 instead of $500 → IRS penalty $150.00
• 2023: Paid $467 instead of $500 → IRS penalty $594.00
• 2024: Paid $66 instead of $500 → IRS penalty $150.00 + interest $1.86

The correct repayment for each year should have been $500, but TurboTax computed and filed lower amounts for 2022 and 2023, and a significantly lower amount for 2024. These miscalculations directly caused a total of $895.86 in penalties and interest, which I paid to the IRS.

Given that these penalties and interest were the result of incorrect calculations in the TurboTax software, I respectfully request a refund of $895.86.

I have documentation from the IRS showing the amounts paid and the penalties assessed, and I am happy to provide them upon request.

Thank you for your attention to this matter, and I look forward to your prompt resolution.

Sincerely, John

[xmasbaby0]

This is the user forum where we answer tax questions and help with navigating /using the software.

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https://ttlc.intuit.com/turbotax-support/en-us/help-article/intuit-account-billing/submit-claim-turb...

[VolvoGirl]

I wonder why the 2023 penalty was so much more than the other years?   If you find out anything like why the payments were wrong, please let us know.  It may help the next person.   

[dmertz]

First, it seems to me that you told 2022 TurboTax that you claimed only $7,000 of this credit on your 2008 Form 5405, not the $7,500 actually claimed, resulting in TurboTax correctly calculating a minimum required repayment of $467 for 2022 and 2023.  With you telling 2022 TurboTax that a total of $6,000 was repaid in 2010 through 2021, plus the $467 paid each year 2022 and 2023, that left only $66 of $7,000 to be repaid in 2024.  In other words, it seems that TurboTax made no calculation errors.  (I'm assuming that you transferred in the prior-year TurboTax file when beginning your 2023 and 2024 tax returns.)

Second, I don't see how an underpayment of tax by $33 in 2022 and 2023 can cause penalties and interest of $150 and $594 respectively, and an underpayment of tax by $434 in 2024 can cause a penalty of $150.  It seems to me that these penalties are the result of under-withholding or insufficient estimated tax payments having been made and have little to do with the mistake that you made when preparing your 2022 tax return.