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Oregon federal tax subtraction is incorrect

cinmon428
Level 5

Previously I indicated that the federal tax subtraction for 2020 on the Oregon return is incorrect, because only the first stimulus was reducing the amount of the federal tax subtraction. I believe this is a bug in the program, because when I indicate that I did NOT receive the second stimulus (and therefore should be credited on the federal return), then the second stimulus DOES get subtracted on the Oregon return. But if I indicate that I HAVE already received the second stimulus, then there is no subtraction on the Oregon return. This does not seem like a problem with an update, but rather a bug. So let me be specific: The amount showing for the second stimulus received (line 19 on the Recovery Rebate Credit Worksheet), while it SHOULD reduce the 2020 federal tax liability subtraction on Oregon Form 40 (line 10), it DOES NOT. Can someone report this for me to the people who fix these things or let me know how I can tell them? I don't see any workaround without getting hit with errors in the program. 

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cinmon428
Level 5

Good afternoon

 

For the Federal Tax subtraction calculation you would want to include both the first and second stimulus payment. Although the second stimulus payment was issued in the year 2021, the way the legislation was passed it’s intended to be a credit that affects the 2020 tax period and would therefore be used in the Oregon Federal Tax subtraction calculation for the 2020 return. Our e-filing coordinators have clarified this matter with the tax software vendors and asked they update their forms to correctly calculate this subtraction, the tax software companies should be updating their programs accordingly.

 

Thank you

 

Our response is based on the information you included in your e-mail.  If your situation or facts change, or you need more information, please contact the Department of Revenue again. 

 

Best Regards,    

 

Crisel

Tax Practitioner Specialist

Oregon Department of Revenue

Office: 503-947-3541

               503-378-4988

Fax:       503-945-8736

Email: [email address removed]

Data Classification Level 3 – Confidential

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87 Replies 87
George4Tacks
Level 15

@IntuitBettyJo will pass this one for you.


ex-AllStar
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cinmon428
Level 5

Much obliged!

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BobKamman
Level 14

It’s always dangerous to follow the instructions, but what Oregon tells you is:

“Enter the tax rebate (economic stimulus payment) you received from the federal government in 2020 [emphasis added] plus your recovery rebate credit, if any (Form 1040 or 1040- SR, line 30).”

This amount is subtracted from 2020 actual tax, so it reduces the federal tax deduction (FTD).

So if EIP#2 was not received, it will result in a recovery rebate credit, and a lower FTD.

If it was received, it would have been in 2021, not in 2020, so there is nowhere it needs to be entered.

Isn’t this what you are saying the program does? If so, where is the error? Always remember, don’t expect taxes to be logical.

cinmon428
Level 5

I do see your point and I have asked for a ruling by Oregon about that. But as you say, instructions are not always to be believed. The instructions you quote were undoubtedly made before the second stimulus came out, and therefore the need for the ruling. 

 

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cinmon428
Level 5

Further, I don't see how it makes sense that the second stimulus subtraction would be calculated to reduce the federal subtraction  if you DID NOT receive the second stimulus yet, but it WOULD NOT be calculated to do the same if you DID receive the second stimulus. That's absolute nonsense. I've been doing this long enough to know that taxes aren't logical, but this is ridiculous. 

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cinmon428
Level 5

If you want to see what I see regarding this error, set up a fake account, single (doesn't matter), income of say, $60,000. Before you fill in the Rebate worksheet, check the amount of the Federal tax subtraction on the Oregon return. Now go to the (federal) Rebate worksheet and type in $1200 received for the 1st stimulus. Leave the 2nd stimulus blank. Go back to Oregon and check the Federal tax subtraction now. You'll see a decrease of $1200 there. Now return to the Rebate worksheet and type in $600 received for the 2nd stimulus. Return to Oregon and check the Federal tax subtraction again. NO CHANGE!! 

Ok, now delete what was typed on the Rebate worksheet and start over. This time, indicate that you have NOT received any rebates. In other words, fill in zero for each stimulus received. Go back to the Oregon return. You'll see that the Federal subtraction has been reduced by a FULL $1800.

Does that make sense? It does not. 

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George4Tacks
Level 15

Taxes - Logical NOT ALWAYS - Nonsense  QUITE OFTEN 

This is going to be a wonderful year. 

Possibly you will just need to wait a bit for the software to catch up to the new year. 

Next scenarios - You did not receive the EIP and the 2020 tax is reduce by the would have been EIP - You did get the EIP in 2021, but it was not appropriate based on 2020 income and you did not have to pay it back - ...

This is going to be a wonderful year. 


ex-AllStar
cinmon428
Level 5

Well if you got the EIP because your income was lower in 2018 and/or 2019, you wouldn't have to pay it back in 2020 for federal, and for Oregon, you would show on the Rebate worksheet that you got it (both of them, let's say). Then you would still have the problem for Oregon that the second stimulus wasn't taken into account. But if you hadn't gotten it yet and you indicated that you wanted it, I assume you wouldn't get it because your income is now too high. I haven't tried that scenario yet for what it would do to the Oregon subtraction. I'm afraid to. 

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BobKamman
Level 14

Now go to the worksheet on Page 13 of the Form OR-40 instructions and fill it out according to your hypotheticals.

Although most items of income and deduction are calculated on the cash basis, Oregon uses accrual basis for the federal tax deduction. Fill out the worksheet for a single person with $100,000 income who owes $1,000 in federal tax and has paid nothing by December 31. The deduction is still $1,000, right? EIP’s have nothing to do with it.

What happens in 2020, stays in 2020. The recovery rebate credit was enacted in 2020. If some of it is used on the 2020 return, it reduces the deduction on the 2020 return. If some of it accrued in 2021, wait till next year and there will be a place to make that adjustment.

Intuit programmers have enough to do for the rest of us, without falling down this rabbit hole.

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cinmon428
Level 5

You haven't taken into account those people who did not receive the second stimulus. You are required to fill out the federal Rebate worksheet, right? You are required to enter how much you received for each stimulus. Let's say you received zero for the second stimulus and you enter "0" on the rebate worksheet. Now go to the Oregon return. Oregon has subtracted the amount you received as a credit on your federal worksheet for that second stimulus. So if you are single and you are due $600, then the program calculates a $600 subtraction for that second stimulus on your 2020 Oregon tax return, EVEN THOUGH YOU HAVEN'T RECEIVED THE MONEY YET. 

 

 

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cinmon428
Level 5

I don't think it's necessary to add nasty comments like you did, by the way. Why don't you try to do better next time?

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cinmon428
Level 5

The deduction is still $1,000, right? EIP’s have nothing to do with it.

This has nothing whatsoever to do with the issue. We are talking about the Oregon Federal Tax Subtraction and how the EIP and/or the Rebate received on the tax return affects it. And although the second stimulus EIP DOES NOT affect it on Proseries and Turbo Tax (and I believe Oregon will tell me that it should), the Rebate for the second stimulus (ie when you request a credit on the return) DOES cause a reduction to the Federal Tax Subtraction. Try it before you respond and you'll see I'm right. And this is a problem. It's a problem that the "software people" are required to fix. 

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cinmon428
Level 5

....UNLESS you're telling me that the EIP is based on the cash basis, so that money received in 2021 is NOT reported, while the Rebate tax credit is based on the accrual basis? Is that what you believe?

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BobKamman
Level 14

Generally, you include an amount in gross income for the
tax year in which all events that fix your right to receive the
income have occurred and you can determine the amount
with reasonable accuracy. Under this rule, you report an
amount in your gross income on the earliest of the following dates.
• When you receive payment.
• When the income amount is due to you.
• When you earn the income.
• When title passes.

I get 2021 for all of those for EIP#2 – after all, Treasury promised that everyone would get a payment who was entitled to one, so there must be something defective about those who claim it was due and they earned it at the moment the bill was finally signed.

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cinmon428
Level 5

Ok, we will see what the Oregon Department of Revenue tells me. 

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I have no income 

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Geni
Level 2

I don't understand why the subtraction needs to be made in the first place, since it is not to be taxed.  The reply I got from a policy person was that is isn't taxed, it is subtracted from the federal tax subtraction.  So in essence, it is taxed, just buried in the math calculation!

cinmon428
Level 5

Bingo! It's Oregon's way of raising taxes without telling anyone. 

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BobKamman
Level 14

@cinmon428  "I have asked for a ruling by Oregon about that."

Maybe @George4Tacks can pass that information along to the Intuit programmers also.  

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cinmon428
Level 5

https://www.oregon.gov/dor/programs/taxpro/Documents/2020-Oregon-New-Law-Update-for-Attendees.pdf

 

Check page 17 here. You'll see, according to the Dept of Revenue's own course, that both stimuli are to be be used to reduce the federal tax subtraction.

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BobKamman
Level 14

Keep trying.  That course was put together December 14 -- they must have done a very fast edit after the bill was signed December 27.  Could be that a Tax Auditor 2 making $77,000 is the expert.  But maybe not.  

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cinmon428
Level 5

Good afternoon

 

For the Federal Tax subtraction calculation you would want to include both the first and second stimulus payment. Although the second stimulus payment was issued in the year 2021, the way the legislation was passed it’s intended to be a credit that affects the 2020 tax period and would therefore be used in the Oregon Federal Tax subtraction calculation for the 2020 return. Our e-filing coordinators have clarified this matter with the tax software vendors and asked they update their forms to correctly calculate this subtraction, the tax software companies should be updating their programs accordingly.

 

Thank you

 

Our response is based on the information you included in your e-mail.  If your situation or facts change, or you need more information, please contact the Department of Revenue again. 

 

Best Regards,    

 

Crisel

Tax Practitioner Specialist

Oregon Department of Revenue

Office: 503-947-3541

               503-378-4988

Fax:       503-945-8736

Email: [email address removed]

Data Classification Level 3 – Confidential

View solution in original post

George4Tacks
Level 15

@cinmon428 Thank you for that wonderful update. You can mark it as the solution, making it easier to find for anyone searching. 

Have a great tax season!


ex-AllStar
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BobKamman
Level 14

Welcome to Oregon Tax Jeopardy!  Alex Trebek is no longer with us, but you can still play along.  We will give you the answer, and then you have to correctly guess the question in the form that it was asked.  

Nothing here addresses the issue of someone who has not  received EIP #2, and may not.  So is the state going to revise the tax form instructions?  Or is this just a secret shared with practitioners?  There are probably some media people in Oregon who know a good tax story when they see it.  

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Geni
Level 2

Lacerte, on Feb. 3rd, said they got no direction like this from Oregon Dept. of Revenue.

 

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sjrcpa
Level 15

Do they expect OR to personally reach out to them?


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BobKamman
Level 14

@sjrcpa "Do they expect OR to personally reach out to them?"

In the Oregon Dept of Revenue email quoted in a message here, they said that they had reached out to the software developers.  That's why I asked the state for a copy of what they had sent.  Still waiting.  

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sjrcpa
Level 15

@BobKamman Thanks. The thread was getting long. I missed that part.


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Jerri
Level 1

The Oregon calculation for the Federal Tax Subtraction is still not corrected.  I talked with Nicole Carol at Intuit yesterday and she assured me that something was going to be done.   She was very knowledgeable and helpful. 

She said I would receive an e-mail either yesterday afternoon or today regarding either that the software would be corrected or a work-around would be posted.  

The only e-mail I have yet received is the one that directed me to the Commmunity.

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cinmon428
Level 5

The workaround I was told to use was to override the incorrect number for the FTS and uncheck the error-checking box when you go to send the returns to Intuit. That has worked well so far. I don't know what will happen on Friday, but all of my returns that the software has done incorrectly and that I have overridden have gone through. 

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martyr901
Level 2

I, too, have verified that today's (2/10/2021) version of TurboTax Deluxe containing Oregon Form 40 performs an incorrect calculation of the Line 10 Federal tax liability by utilizing only the FIRST of the two received stimulus payments in the calculation.  

I reached out to the Oregon Department of Revenue on 2/9, and the person I spoke with agreed that BOTH stimulus checks are to be counted on 2020 tax returns.

I am heartened to hear that a knowledgeable Intuit person named Nicole Carol is saying "something was going to be done".  Can anyone provide the when exactly this will happen?  Is there any way I can get in touch with her to verify? 

If this isn't fixed by a prompt software update, I may be forced into mailing a paper copy of the Oregon return.

Jerri
Level 1

Hi ALL - this is Jerri, the one that talked to the great Nicole Carol!

I just did an update and the Oregon calculation on the Federal Tax subtraction is corrected to include both the EIP1 and EIP2 Stimulus payments.

Yahoo!

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cinmon428
Level 5

CONFIRMED--The Proseries Basic program is now correctly calculating the Oregon FTS for EIPs and for Rebates. About time!

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martyr901
Level 2

Thanks for the reply, Jerri.

The Oregon Federal Tax Liability calculation solution you have just announced must be part of a software update to the ProSeries?  I just opened 2020 TTax Deluxe, and nothing has yet been updated (2/10) to fix the error.

Hopefully, the software update you have mentioned will trickle down to us individual filers?

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Jerri
Level 1

That would be logical and correct, but I don't know that I would count on it.

Is there a number to call for Turbo Tax support so that you can push it?

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martyr901
Level 2

Oh, yes.  The last two days I have been on the phone for hours with TTax Support folk.  Unfortunately, one gets stuck with low level problem solvers, who mostly stick to a script.  Efforts to proceed to a higher level of problem solving get stymied.  That's why I inquired about the contact info for your problem solver Nicole Carol?  Is there a way I can alert her to the problem as it still exists for individual TTax filers?

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Jerri
Level 1

Okay, I get it.  I called the ProSeries Tech Support # and when asked said that it was a program calculation error...the program wasn't working right.   I let them call me back and Nicole was the terrific person who called back.  That was the first time I got real help.  The other times I called in I got the same party line and and an e-mail that had the link to the Accountants Community that we are conversing on now.  

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martyr901
Level 2

Thanks, Jerri.

Sigh, yes, I have been saying over and over that I believe it to be a software error in the program.  They never give me anyone to deal with that or offer to call me back, so I get no real help.  I take it you don't have Nicole's number to provide me a way to find some real help?

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Jerri
Level 1

No, I don't.  However, Nicole did say that she usually gets the Software glitch questions.  Maybe I was just lucky when I called in.  I simply gave my problem as "software not working properly".

 

 

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BobKamman
Level 14

I just did an update and ProSeries Professional still shows more Oregon tax owed if the $600 EIP#2 is not shown on Line 19 of the Recovery Rebate Worksheet.  

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cinmon428
Level 5

Bob,

The Rebate part of the calculation was always correct. In other words, say a person did NOT receive the second stimulus payment and wants a credit on his taxes. So you enter "0" on line 19. THAT CALCULATION WAS ALWAYS CORRECT. What WAS NOT correct was the Oregon Subtraction in the event that a person DID receive both stimulus payments in advance. The second stimulus, whether it was 1200, 600, or whatever, was not being subtracted from the FTS on the Oregon return. 

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Jerri
Level 1

Correct!  The second stimulus payment was not being deducted from the federal tax with the 1st one.  That is what I went over in great detail with Nicole Carol at ProSeries yesterday and the last update I received corrected the problem.

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BobKamman
Level 14

@Jerri  

Still not working that way on mine, and I just updated.  Maybe try again tomorrow.  Maybe Basic has a higher priority than Professional.  

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cinmon428
Level 5

I just tried Professional with the Oregon FTS and it works perfectly on my computer, whether I enter pre-payments of the stimulus or credits on the tax return. Works like a charm.

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Jerri
Level 1

I just received a "noresponse: e-mail from the fabulous Nicole Carroll.  She told me that they were working on it and it would be out today or tomorrow or at least by Friday in the updates.  As I said, it is working for me.  It subtracts both stimulus payments from the federal tax and that number transfers to the Oregon Federal Subtraction.  Of course. there is no change in the minimum federal subtraction if the tax is say $10,000 and the Stimulus payments are 1,200 and 600 because 10,000 - 1,800 is $8,200 which is more than the maximum federal tax subtraction.

Hope an update that fixes it comes thru for you!

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martyr901
Level 2

Thanks, Jerri.  I have finally received a call back from a higher level tech person who has asked me to submit my tax file and will begin looking into the error from the TTax Deluxe software perspective.  I am not a tax prepare professional, so this forum has done wonders to confirm that I am not crazy!

I fully understand how the stimulus payments are supposed to be applied to determine the figure in Line 10 of Oregon Form 40 and how the final effect depends on how much federal tax liability each person has.  I happen to be in the area where the stimulus payments subtraction take me below the Oregon maximum federal tax subtraction.  That's what alerted me to this subject in the first place!

Just for clarity for us TTax Deluxe individual filers:  When in the Federal section, there is a page for entering the amounts for both stimulus checks. All looks well and good there.  However, when proceeding to the Oregon form 40 section, the software only uses the FIRST stimulus check amount in the calculation in the worksheet entitled “Oregon Federal Tax Liability Subtraction Worksheet”.

You can verify that by going to the Forms link (upper right corner). Once the Forms window pops up on the left, scroll down to Oregon Individual and look for “Fed Tax Lib Wk”.
Click on that to open the worksheet. You should notice that only the FIRST stimulus payment is subtracted in the calculations, not both as should be.

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Jerri
Level 1

Glad you are getting the attention you should.  If everyone in Oregon who uses TTax were to use it without the correction that should be coming now that you have reached someone, it would be a mess.

I'm glad you stuck with it.

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cinmon428
Level 5

For many people who have already sent their TTax returns to Intuit, yes, there will likely be a problem. They will likely receive a correction notice from the Dept of Revenue who knows, many months from now, with a request for payment because stimulus #2 wasn't used, and possibly with penalties and interest. So this is why I started complaining about this quite some time ago. And I would strongly recommend better communication with the Intuit software people in the future. There needs to be a board showing the known issues and expected dates of correction. This is really unprofessional the way this has been handled. 

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Geni
Level 2

Jerri:

I have found that sticking to the issue until resolution is a great way to solve these issues.  You just have to find the right tech person who is willing to walk through the whole process with you to see the problem.  Hope it works.

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