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Federal and California taxes incorrectly calculated by TurboTax (desktop) - should TurboTax be responsible for the errors?

Forum|Forum|1 year ago
April 30, 2024
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I got back some letters from IRS and State of California Franchise Tax Board recently.

On Federal, the letter said some penalty was incorrectly calculated so they sent a check back.

On California, TurboTax determined I qualify for excess SDI and FTB said that is not correct, so my refund was reduced by that amount. Also, most likely because of that, the refund was not directly deposited in my account.

I am wondering why, despite so many checks in the TurboTax desktop step-by-step, that both of those were incorrect. What is the guarantee that the product offers and besides not choosing TurboTax next year, what else do I have at my disposal for these mistakes and how does TurboTax restore trust in their product?

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Best answer by VolvoGirl

For the federal penalty. That is common. The amount Turbo Tax calculates on your 1040 line 38 is only an estimate. Turbo Tax can not figure it accurately because they don't know exactly when the IRS or state will get your return and tax due payment. It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

For California SDI excess. CASDI is like federal Social Security and Medicare. It is a mandatory withholding and tax. If you have more than 1 employer and together the CASDI went over the max you can get the excess SDI back. And it is for each person. So if you are married you have to enter each W2 under the right spouse or it will look like 1 person went over the max. That is a common user error.

2023 CASDI is 0.90% on a max of $153,164 of wages. Max is 1,378.48.

VolvoGirlAnswer

Employee

For the federal penalty. That is common. The amount Turbo Tax calculates on your 1040 line 38 is only an estimate. Turbo Tax can not figure it accurately because they don't know exactly when the IRS or state will get your return and tax due payment. It's very common and normal and expected for the IRS or state to bill you for more or send you a refund.

For California SDI excess. CASDI is like federal Social Security and Medicare. It is a mandatory withholding and tax. If you have more than 1 employer and together the CASDI went over the max you can get the excess SDI back. And it is for each person. So if you are married you have to enter each W2 under the right spouse or it will look like 1 person went over the max. That is a common user error.

2023 CASDI is 0.90% on a max of $153,164 of wages. Max is 1,378.48.

R

rpmmAuthor

Thanks for the quick and detailed response.

I was surprised because this is never happened to me and I have been using TurboTax since 1999. Besides, there was no heads up in the TurboTax dialog boxes about potentially seeing a different tax penalty amount, but I could be wrong.

As for the CA SDI, again, I use TurboTax to guide me. If any of the conditions are not applicable, I expect TurboTax to show me that information so if nothing else, I would not be surprised when FTB comes back with a different calculation.

VolvoGirl

Employee

For the Penalty, before you filed you could have filled out form 2210 to try to reduce or eliminate it or to let the IRS figure it out for you. Something to remember for next year.

If you do not pay in enough tax from withholding and estimates, you may have to pay a penalty for underpayment of estimated tax. Even if you are getting a refund you can still owe a penalty for not paying in evenly during the year. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. It is included in your tax due or reduces your refund.

You might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button