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CGCPA
CGCPA, CPA
Category: Finance
Satisfied Customers: 3738
Experience:  40+ years experience in taxes and financial planning
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I recieve only disability income. I enter those amoutne at

Customer Question

I recieve only disability income. I enter those amoutne at the questions regarding a 1099r form, and an SSA 1099.

My final form always shows $7000 plus as wages on line 7, form 1040.

I have only those two sources of disability. No investment's, home ownership, trusts etc.

Turbotax tell me I need to fill a 1040 for because itemization, but when I printed my entire return, I have no Schedule A printed showing deductions.

Why wages (line 7)show when income listed under 1099r and ssa1099. How do I have deductions when I don't receive a form A filed.
Submitted: 3 years ago.
Category: Finance
Expert:  CGCPA replied 3 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

The schedule A should be printing IF you are actually using itemized deductions on the return. The software compares the total itemized deductions you input to the standard deduction and uses the one that produces a better result for you. It may be that the standard deduction is the better choice. IF this is not the case, you will need to over ride the system and print Schedule A so that you can attach it to your return.

 

Some disability incomes are considered a continuation of wages and Turbo Tax is apparently reflecting this. Check the disability forms to see is there is anything in this area. If not please get back to me with the line item, description, and amounts shown on each 1099 and I will dig further.

Customer: replied 3 years ago.
Thank you Mr. Grenier for you timely response. It will take a bit of time in order to give you each line and amount. I will do that and email back.

I was wondering tho, if I might fax the copies to you so that you might see firsthand the problems I am having.

I reprinted everything and did get a Schedule A form. In looking at my return, two things jump out. I show wages of $12936 on line 7. An amount that would be on a W-2 that I dont receive.

The other major concern is that Line 40 in the amount of is 26,097. Line 38 is $13140. Line 40 is $26,097. Leaving line 41 in the amount of $(-$12,597)

I then show $850 0n tax paid which id correct on line 61. $400 on line 63.....I dont even know what that is, and $26 on 64a. I dont know what that is either.

My return is pending....because of the itemization. Can I start all over and send an amended return? O have had no trouble over the last 4-5 years using you service, but I think this looks very odd.

I spoke with a woman from the IRS office. For the last 6 years at least And throughout most of these years I have been solely depended in disability payments. She pulled up my last years return and it showed monies on line 7 wages as well and said it was not correctly filed.

My 1099r and SSA 1099's are as followed.

1099r----1. Gross distribution = $12,936.12
2a. Taxable amount = $12936.12
3. Capital Gain = $0.00
4. Fed Income Withheld = $850.00

SSA 1099 Box 3 = $24942.00
Box 4 = NONE
Box 5 = $24942.00
Box 6 = NONE.

Hope this helps.

Expert:  CGCPA replied 3 years ago.
Please fax this to me at XXX-XXX-XXXX. It sure sounds strange to me.
Expert:  CGCPA replied 3 years ago.

I have found the answer. It is something I would never have dreamed. In the case of disability payments made prior to normal retirement age, box 7 is indicated code 3. The amount that qualifies as code 3 is to be recorded as wages on line 7 of the tax return. That is what your software is doing. The IRS agent you spoke with is in error.

 

AS an interesting aside, you may also, because of this reporting methodology, be entitled to the earned income credit. Take a look into that and see if it helps.

Customer: replied 3 years ago.
Mr Greiner,

I talked with the IRS last night and as we walked thru my return there was a major error discovered that reduced the amount of my projected return by around $400.00.

For some unknown reason on my part, the software entered a credit/deduction of $26,097 on line 40 of the 1040 form.

I have no idea why this was generated. I did receive credit for payment on line 63 for $400.00 and EIC of 26.00 on line 64a.

I do not know what to do at this point. I have electronically filed a return that was indicated as correct by turbo tax, but I do not believe the error to be caused by how I completed the form.

What do you suggest I do now?

Being charged for a error-ed return and for follow up with you does not seem fair to me. I do believe I filled the forms by answering all questions properly, and received a correct filing by Turbo tax, which in fact was not the case.

I can still email my return if you'd like me to. But my biggest concern now is that it appears I have sent in an errored filing to the IRS.

What now sir?

Sincerely, Douglas J. Sherman
Expert:  CGCPA replied 3 years ago.

The error of $400 is the same amount as the "Making work pay credit" on line 63. Because Turbo Tax recorded $7,000 in box 7 (wages) as should be done, it automatically calculated the credit. Technically, you are not entitled to the credit here since your income is from disability benefits rather than work. However, I could argue that you are entitled because the disability is the result of working and that is why $7,000 goes to line 7.

 

The entry on line 40 baffles me. I do not use Turbo Tax. Too many people with problems coming here to us. It is a great program but requires a bit more knowledge than many do it yourselfer possess.

 

Nevertheless, I see the return as only having only potential change that will effect you. The reason I say this is that with your total income, the taxability of only a portion of your Social Security, the standard deduction, and your personal exemption you should have a tax on line 44 of zero. Therefore all withholdings ($850) plus the EIC ($26) and maybe plus the $400 should be refunded to you. The $400 is the only area of possible change and it is money that you did not pay in. I would not lose any sleep over it. If you get it great, if not let it go.

 

I would contact Turbo Tax about what is happening here. Send them a printed copy of the return and a letter explaining your issues. If they have been wrong they can at least use it to improve for the future. Also,do not think that all IRS personnel are so very smart on tax issues. Some are seasonal help, some are experienced in only one area and yet the IRS uses them as needed at this time of year. The IRS does not even guaranty the accuracy of telephone advice given by its own staff.

 

Let me know if you need additional assistance.

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