Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

MT Form 2, Itemized Deduction Schedule, Line 4a Reporting Incorrect Federal Amount

Highlighted
Intuit

MT Form 2, Itemized Deduction Schedule, Line 4a Reporting Incorrect Federal Amount

Montana Form 2, page 6, Itemized Deductions Schedule, line 4a is reporting the amount from Form 1040, line 11a, instead of Form 1040, line 16 as expected. Form 1040, line 11a reports the current year federal income tax; line 16 reports all federal income tax withheld from Forms W-2 and 1099.

ProConnect Tax Online Suggestion

The program limits the MT deduction of federal income tax withheld and/or paid to the federal tax amount calculated on the current year 1040. When this limitation is applied to a return, you will see the following suggestion:
Federal income tax withheld and Federal estimated tax payments are being limited to federal taxes paid on the current year federal tax form. On Married Filing Separate Combined returns, the Federal tax used in the limitation is allocated between the spouses based upon their proportional share of Federal Adjusted Gross Income. Ref #51961

The instructions for 2018 Montana Form 2 state:

The detail provided on line 4 allows you to calculate the sum of income tax payments made in 2018.
However, some of the payments included on line 4a and 4b may be pre-payments of taxes other than federal income tax. For the purpose of this deduction, federal income tax means:
  • The tax calculated on line 11 of your federal Form 1040, excluding any repayment of excess advance payments of the Health Coverage Tax Credit from federal Form 8885;
  • Line 45 of the federal Form 1040, Schedule 2 (Alternative Minimum Tax, federal Form 6251);
  • The Healthcare Individual Shared Responsibility Tax on your federal Form 1040, Schedule 4, line 61;
  • The Net Investment Income Tax reported on your federal Form 1040, Schedule 4, line 62;
  • Any recapture tax based on any federal credit or deduction reported on federal Form 1040, Schedule 4, line 62;
  • IRC 965 net tax liability on federal Form 1040, Schedule 4, line 63;
  • Tax on excess golden parachute payment, Form W-2, code K; and
  • Tax on accumulation distribution of trusts, federal Form 4970.
If the combined amount of federal tax withheld (line 4a) and the federal estimated tax payments (line 4b), is more than the sum of all the taxes listed above on your 2018 federal Form 1040, the difference represents payments you made for taxes that are not deductible federal income taxes. You may reduce the amount you can report on lines 4a and 4b by this difference beginning with the amount on line 4b.

Montana Department of Revenue Announcement (March 13, 2019):

"Several tax practitioners contacted us about the itemized deduction for federal income taxes paid. The Form 2 instructions limit the amount of the itemized deduction to the amount of federal income taxes assessed on the 2018 federal Form 1040.

We call this the direct limitation method.

The tax practitioners were concerned they had already filed returns deducting federal income taxes paid without this limitation.

Our intention was to offer this direct limitation method as an alternative to the recovery method which requires a calculation spread over two tax years.

Both the direct limitation method or the recovery method are correct. Montana tax returns already filed do not need to be amended.

Please remember: The recovery method may require an addition to income in the next year."

Read the full announcement here.

Overrides Available in ProConnect Tax Online:

Two override inputs are available on the Deductions > Itemized Deductions (Sch A) screen, under the section labeled Montana Itemized Deductions:

  • Reduction to federal tax withheld [Override] - Enter an amount here to override the program's calculation of the reduction to federal tax withheld on Montana Itemized Deduction Schedule on Form 2. This entry adjusts the amount of federal income tax withheld that prints on the Itemized Deduction Schedule (Form 2, line 4a).
  • Reduction to federal estimated tax payments in 2018 [Override] - Enter an amount here to override the program's calculation of the reduction to federal estimated tax payments on the Montana Itemized Deduction Schedule on Form 2. This entry adjusts the amount of federal estimated tax payments that prints on the Itemized Deduction Schedule (Form 2, line 4b).

 

Was this helpful?

You must sign in to vote, reply, or post
Labels (1)