TurboTax Deluxe 2022 Desktop - Incorrect calculation of underpayment penalty for Maryland state and local taxes

Forum|Forum|3 years ago
February 18, 2023
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I am using TurboTax Deluxe 2022 on a Windows desktop. It appears to incorrectly calculate the penalty for underpayment of Maryland state and local taxes. On 2/23/2022, Maryland government extended the deadline for payment of estimated taxes for Q1 and Q2 of 2022 to 7/15/2022:

"Effective February 23, 2022, the due dates for the first and second quarter individual income tax estimated payments for tax year 2022 have been extended to July 15, 2022."

Accordingly, I made the combined estimated tax payment for Q1 and Q2 of tax year 2022 on 7/13/2022, i.e. before the extended deadline. However, TT apparently considers these payments late, i.e. not made before their respective non-extended deadlines (4/15/2022 for Q1 and 6/15/2022 for Q2). So TT incorrectly attributes both payments to Q3, together with the Q3 payment I made on 9/13/2022 (before the non-extended 9/15/2022 deadline). Consequently, TT creates a Maryland Form 502UP and calculates that I owe an underpayment penalty, which I do not.

This is a BUG in TT. When should we expect a fix?

[Edit1]

To illustrate the bug, let's assume that the filer had $4,000 of Maryland state + local taxes withheld on the 2022 W-2, and also made 4 quarterly estimated tax payments of $200 each, with the Q1 and Q2 payments made on 7/15/2022 (extended deadline, as described above), Q3 payment on 9/15/2022 and Q4 payment on 1/15/2023 (both non-extended deadlines).

Then the proper calculation of tax payments per quarter on the MD Form 520UP is (note that the quarterly amounts are cumulative😞

Q1 $4000 * (1/4) + $200 = $1200

Q2 $4000 * (2/4) + 2 * $200 = $2400

Q3 $4000 * (3/4) + 3 * $200 = $3600

Q4 $4000 * (4/4) + 4 * $200 = $4800

But instead, TT calculates the following:

Q1 $4000 * (1/4) + (zero estimated payment) = $1000

Q2 $4000 * (2/4) + (zero estimated payment) = $2000

Q3 $4000 * (3/4) + 3 * $200 = $3600

Q4 $4000 * (4/4) + 4 * $200 = $4800

This may result in an underpayment penalty incorrectly calculated for Q1 or Q2 or both.

[Edit2]

One temporary workaround might be to enter non-extended dates for Q1 and Q2 estimated tax payments; this way, TT should not calculate the incorrect penalty. However, in case of an audit, these dates would not much the actual payment date in the filer's records. So this is not a permanent solution.

Other

mrk06Author

To the Employee Tax Experts @LindaS5247 @AbrahamT @JosephS1 @TomK2023 @HopeS :

Could you please look into this TT bug and advise if a fix is in the works and if so what the ETA of it is? I am due a substantial refund of Maryland state + local taxes, and this bug is blocking me from filing the return.

AmyC

Employee

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:

Sign into your online account.

Locate the Tax Tools on the left-hand side of the screen.

A drop-down will appear. Select Tools

On the pop-up screen, click on “Share my file with agent.”

This will generate a message that a diagnostic file gets sanitized and transmitted to us.

Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

Open your return.

Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent”

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.

Please provide the Token Number that was generated in the response.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

mrk06Author

@AmyC

There is no way I will be submitting a copy of my tax return to you or any agents. Given the bugs present in TT, I do not trust that "sanitization" would remove all of my personal and other sensitive information.

Instead, you should create a simple test tax return from scratch to reproduce the TT bug. Start with a single filer with one W-2 with insufficient withholding of Maryland tax. Add four quarterly estimated Maryland tax payments on non-extended due dates (4/15/2022, 6/15/2022, 9/15/2022 and 1/15/2023) that together with the W-2 withholding result in no tax due and underpayment penalty assessed. Then change the estimated tax payment dates for Q1 and Q2 to the extended due date of 7/15/2022 and see how this causes the Maryland Form 502UP to be generated and the underpayment penalty calculated in the PDF of the return saved by TT.

db129

Hi,

I am impacted by this problem as well. Please provide a fix. Maryland did not help by failing to update 502UP for the 2022 tax year. I expect many to be impacted by this issue.