Level 6

Solved

Oregon federal tax subtraction is incorrect

Forum|Forum|5 years ago
January 17, 2021
5 replies
0 views

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.

ProSeries Basic

This topic has been closed for replies.

Best answer by cinmon428

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.

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

George4Tacks

Level 15

@IntuitBettyJo will pass this one for you.

Answers are easy. Questions are hard!

C

cinmon428Author

Level 6

Much obliged!

BobKamman

Level 15

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.

C

cinmon428Author

Level 6

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.

C

cinmon428Author

Level 6

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.

climbon05

Level 2

Hi...I don't mean to beat a dead horse here but I want to be sure I understand something. Prior to inputting my simuls I had a refund both fed & state. Post entering my stimulus: Fed unaffected as I would expect, State I now owe. I noticed after inputting the $1200 stimulus as the software requested I am now in a "owe" situation. Is it true this is somehow taxable by the state?
OR Fed Tax Liab Subtraction Worksheet:
Fed Tax Liab 5,839
Recover Rebate Credit 1,200
Subtract 9 from 5 4,639
Max allowed 6,950
Smaller of 10 or 11 4,639
Can someone help me understand why this is taxable? Why it is reducing the fed liability that ends up increasing my taxable income? I was under the impression the stimulus was not taxable...but maybe OR Dept of Rev believes differently from IRS (Fed)?
Thank you for any explanation someone can give.

BobKamman

Level 15

@climbon05

Your result is what to expect from following Oregon published guidance. You can make up your own rule and phrase a question so that someone in Salem agrees with you, or you can wait until all Oregon taxpayers are told that there is a mistake in the instructions.

From Oregon Publication OR-17, page 65

The [federal tax] subtraction is based on the accrual method of accounting. This means you subtract the total amount of your federal tax liability after credits for the current tax year (not less than zero) as shown on your original return, regardless of when you pay it.

C

cinmon428Author

Level 6

If you want to go to Oregon Tax Court and fight this, be my guest. You can't make up your own rules.

J

Jerri 11

Level 3

Is there any information on WHEN the ProSeries software will be corrected to include the 2nd stimulus in the calculation for Oregon Tax? Why don't they just do the same thing they did for the Lacerte software and make it a calculation on the Federal Tax Subtraction in the Oregon return?

C

cinmon428Author

Level 6

I must have spent 10 hours complaining until I was blue in the face and still no change. But you can uncheck the box to "check for errors" when you efile and the return will go through to Intuit even though there is an error message that you overrode the amount they show.