TurboTax produces erroneous refund when amending 2020 Tax return because TT built-in includes a UCE deduction that is TWICE as much as when I originally filed.
my casual research....
Remember, 2020 was that COVID year...
I was unemployed, we file joint (30+ years), I had unearned unemployment income over 10200, and my spouse worked.
My original form (a PDF stored) shows a -10,200 on line 8, schedule 1 d
When I filed, my estimated taxes were split between refund and future taxes.
Then in 2021, the IRS sent an unexpected refund - I had no idea why...
So, today, it's 2023. I want to amend my taxes,
I open up the 2020 TT file and the schedule 1, line 8 is now -20400. I contrast it to my original filings PDF and it shows my AGI is off.
When I open an amendment, before any changes - it shows I am due a refund that equates to the supplemental IRS refund received after my filing/refund.
Here is the pain-point - I fetch my 2020 transcript from the IRS has my original filing including the -10,200 deduction. I don't see any reference to the extra refund.
Here is my logic... After I filed, the IRS ruled that community property states should get double the deduction. It's a guess. But I can't justify it because my form clearly shows spouse income and no 1099-G for the spouse.
If I want to file, I'll get a refund instead of a payment.
TT is broken. (There is no way to override the UCE deduction!)
Is the IRS broken? Uh, anyone have an opinion? I bet they won't remember anymore than anyone else...
The unemployment benefits that you received are community income. You are supposed to report half of it as your income and half of it as your wife's income. Each of you can exclude up to $10,200 of your individual half of the unemployment. TurboTax might now be doing this automatically, but did not do it when you originally filed your 2020 tax return.
As you correctly guessed, the IRS changed how the unemployment exclusion was calculated in a community property state. This is undoubtedly why they sent you an additional refund. Your IRS transcript reflects your tax return as originally filed. They do not update the transcript if they make a change.
See Q4 at the following link on the IRS web site.
2020 Unemployment Compensation Exclusion FAQs — Topic A: Eligibility
Thank you RJS.
When I make an amendment to my 2020 Tax return, such, other income related to an asset disposal schedule C, I would expect Turbo Tax to show an amount due. In my case the payment should be small - say $50 for our example for say a sale of $200. (I made up the numbers)
But as mentioned above, the amendment / TT app does not know the IRS sent a supplemental refund. That refund is much greater than $50 - let's say it was $1000. TT amendment say, the IRS owes the taxpayer a refund of $950.00
On the surface, it looks like I am asking the IRS for a refund. I AM NOT.
What's the path to adjust my original filing, pay my expected bill, etc?