Lacerte/IRS Tax Calculation

[TS23]

Lacerte tax calculation different than IRS. Anyone else receive notices from the IRS stating tax has been recomputed resulting in lower tax than what Lacerte calculates? This is specific to farmers that sold farm property and use Schedule J. It can be both schedule F or (in most cases), farming activities held in passthru entities. I've made multiple attempts to work with Lacerte by sending them the tax return files from the software as well as IRS transcripts but they will not make the effort to take a deep dive into the tax calculations. They simply state that we will need to get the tax calculation details from the IRS. I doubt any of our clients that received a lower tax would want to open up a potential can of worms by having the IRS look into it? Does anyone know what department of the IRS would actually provide the math calculation (with the capital gains worksheets) breaking down exactly how the tax was calculated? And, why wouldn't Lacerte want to look into this? If anything, what if there is an efile transmission issue causing a figure to go into a different place in the IRS system on certain returns.

This has been concerning to say the least. I have now seen this in 2019-2021 Lacerte software. All figures on the tax return are identical to IRS transcripts except the tax computation which is directly related to Schedule J. Been using Lacerte for at least 22 years but might be time to start all over within something else. Ugh.

[sjrcpa]

Have you done the calculations yourself? That would be my first step.

How do you know IRS is right and Lacerte is wrong? It might be the other way around.

IRS has been known to be wrong. To a lesser extent, so has Lacerte (based on my too many years of experience)

[TS23]

I tried a manual calculation with a 2020 return and came up with similar to Lacerte. However, with complexity of the tax calculation on these particular returns, I cannot be 100% sure its correct or whether its the IRS or Lacerte.

Comparing IRS transcripts, capital gains tax calculations are identical. But, the overall tax using schedule J is different. The transcripts do not provide line 4 of sch j which is where I'm guessing the difference must lie unless the averaged tax using prior year rates is wrong (which the transcripts indicate they are the same as reported on the tax return). Line 4 is a current year tax calculation (capital gains tax worksheets) when using schedule J. Several high income tax returns between 2019-2021 have had this issue. Odd that the IRS and Lacerte agree on the 'normal' capital gains tax calculations but not the capital gains tax calculation when involving Sch j...if this is the issue.

I appreciate the response and will be manually calculating the tax on a 2021 return which I had just received the notice. And, will compare the worksheets between the IRS and lacerte.

I really hope to see if there are any others out there that may have experienced it. Prior to 2019, Ive never had issues. Im probably about 80% Ag returns so its odd to have this pop up in recent years when I've filed so many similar returns over the years. I know in 18 or 19, there was a 1250 recap issue the IRS had changed due to worksheet errors but it doesnt seem to be the issue.

To be continued once I find time to go through a 21 return manually. I just hope if someone else has seen this issue to mention it here. I brought up a Lacerte 2021 issue with a state tax return and Lacerte was great to research and fixed the software quickly in the heat of tax season. This issue seems to not get the investigatimg I was hoping and why Im mentioning it here to see if there are others. There have been some substantial dollar differences.

Thanks again for the response.

[sjrcpa]

I do zero farms with Schedule J so can't be of any more help.

[TS23]

No worries at all. I appreciate the response. I know there may be a small relative percentage of Ag specific preparers on here. Just hoping to see if any other Ag returns are seeing similar issues with this very narrow and specific set of factors.

Thanks and take care.

[jerry]

Why not submit a calculation challenge to Lacerte, with the IRS numbers, and see what they say?