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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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I have 2 questions:I am using H&R Software.Question

Customer Question

I have 2 questions:
I am using H&R Software.
Question 1: When I enter my mortgage interest as a deduction it changes the amount owed from $1558 to $981. The amount of mortgage interest is $9168 with an AGI of about $90K. That is a $571 drop which is in the .06% range. Why so little change?
Question 2: I had to take a “Required Minimum Distribution” this year from a traditional IRA. The RMD was $7,000. Then the program asked for the total value of the IRA on 12-31-2015, which was about $152,000. My refund of $981, went to an “owe" IRS number of $107, for a 16% change. Why does the end of the year IRA value affect the bot***** *****ne so much when I had 25% withheld for the Fed when I took the distribution?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.
Hi. My name is ***** ***** I will be happy to help you. First, mortgage interest is a deduction, not a credit. A 9K deduction will not automatically result in 9K credit. Also mortgage interest deduction is part of itemized deduction. It is most likely because before you entered the interest you didn't have enough to itemize and the software assumed standard deduction. With entering the interest your itemized deduction is just little more than the standard. You would have to check your Schedule A to see what is causing it. Regarding the question #2, if you took the required distribution do not put the fair market value of your account at the end of the year. The entry is probably confusing the software and is calculating some type of penalty. You do not need to provide fair market value of your IRA to complete or file your return. The software is just a tool, it will never replace experience of a professional tax preparer. It is great for an average returns but if you have slightly more complicated return you may be overpaying your taxes. The software is designed to play it safe.