Warning: ProSeries Federal Carryover Worksheet Error

[Bees Knees]

Client had a 2009 MN state tax liability of $1,014. State withholding was $5,560 resulting in a state refund for 2009.

The 2010 Federal Carryover Worksheet shows the $5,560 in state withholding, but also puts $1,014 as being paid with the return. Thus, there is no taxable state refund entered on line 10 of the 1040, and the state tax deduction on Schedule A is overstated by $1,014.

So far, this is the only client that I find ProSeries making this error. I believe it was an error when the file was transferred from 2009 to 2010.

Anyone else in MN using ProSeries should check to make sure the program is carrying over the MN information properly.

[Gretel]

I actually had a problem with MT state info carrying over for tax refund. Was caused by a non-refundable credit.

Carry-over worksheet stated both, that client received a refund and that he paid to MT.

Maybe there are problems with all state refunds in certain circumstances?

[FEDUKE404]

Questions

Were there any state estimated tax payments involved? In/out during the same calendar year can cause several adjustments to become necessary, especially that nasty "due in Jan but when was it paid ?" #4 payment.

Both taxable refunds and Sch A taxes can suddenly show unexpected results. But in the past, when I've bothered to do by hand the necessary calculations, I've found the TTax amounts to be spot on. (But I also have not prepared any MN returns.)

Also, were entries originally made in the (optional) sales tax worksheets, even if the amounts were not used? Under certain circumstances, the table amounts can create a "floor" and thus affect how much the taxable state refund might be.

FE

[Gretel]

Were there any state estimated tax payments involved? In/out during the same calendar year can cause several adjustments to become necessary, especially that nasty "due in Jan but when was it paid ?" #4 payment.

Both taxable refunds and Sch A taxes can suddenly show unexpected results. But in the past, when I've bothered to do by hand the necessary calculations, I've found the TTax amounts to be spot on. (But I also have not prepared any MN returns.)

Also, were entries originally made in the (optional) sales tax worksheets, even if the amounts were not used? Under certain circumstances, the table amounts can create a "floor" and thus affect how much the taxable state refund might be.

FE

In my case no to all of your questions. I never had a problem with a wrong carryover until this year.

[Mike Mac]

Proseries acknowleged it was a software problem

BeeKnees,

The problem is related to the transfer of 2009 to 2010 for MN returns. I've completed around 175 sets of taxes so far and the problem you mentioned showed up in around 85% of those returns. I transferred all my 2009 clients back on 11/04/10 shortly after Proseries released this year's software. Perhaps you xfered your clients later so less of your clients were coming up wrong. Quite some time ago I discussed the problem with Proseries technical staff who acknowledge the problem. I even sent them a case file (minus sensitive data) of mine so they could try to work out a solution. They never have. To me this is a very serious problem but I am lucky that we noticed the problem early and that I have a very vigilant person who verifys the numbers on the return after I am done working on them (my wife). MN preparers on the Inutuit web site have also noted the problem with a recurrance rate closer to mine than yours.

[Bees Knees]

Thanks for the info. At least I know I'm not crazy.

I transfered my clients around the first of February when I first started doing returns this year (I refuse to do any 1040s before 2/1). So I guess I will only see an occassional error. It doesn't matter that they fixed it for some but not all returns. I still have to check everyone to make sure it is correct. You would think ProSeries would send out a notice to all MN customers informing them about the problem.

[UrgentTaxCare]

ProSeries state tax return amount paid carryover

In our firm, we prepare many prior-year tax returns for delinquent clients. This feature you're describing is built-in to ProSeries, and you have to be aware of it and review the "state income tax amount paid with return" on EVERY client that had a state tax balance the prior year. Otherwise of course, the amount in the State and Local Tax Deduction Worksheet may be overstated...and your itemized deductions will also be overstated.
I realize that this feature is probably supposed to make our lives easier - but for me at least, it causes me extra work. I would rather that ProSeries take that feature out; I really don't want the software making automatic entries in places without also including the ability to turn off that feature.

[Nashville]

Another Monkey Wrench

You guys probably don't need this. But what if you have a situation where the taxpayer chooses to apply a state refund to the next years' estimated state taxes? IOW, the $4046 overpayment to Minnesota from 2009 was supposed to be applied to 2010 MN estimated taxes? How does your software handle this? I guess those of you from the frozen tundra have to 100% double-check everyone if you are under ProSeries.

I don't deal with MN as such, but I have lots of state problems, as I have three S corps with multi-state operations who do not send composite payments. In particular, since this recession began, I am finding more and more states who simply do not refund non-residents and Alabama may wait until August/September for their OWN residents. My strategy is to always apply overpayments to the next year. That way the client gets an assured cash flow reduction in funds expended, and doesn't have to deal with contrary state revenue departments.

In some states, Georgia and Kentucky to name a couple, Revenue people are desperately going through prior years to find money. The last couple years, very few of the corporations have reported a profit, so they can't recover money from 2008-9-10. But some of them are going back to 2005-6-7 to find returns with profits so they can pick the wishbones for tax money. Although the media would have you believe these state and local governments continue to spend ravenous amounts of tax revenue, the truth is that they HAVE made cutbacks to some extent -- for the most part, with a few notable exceptions.

[MAJ]

Audits up in deed....

In a brightly lit warehouse down a dark backstreet in Jersey the data from 2007 NJ Tax returns sure are being sifted through with shear stupidity...

I have had 4 clients so far that have shown me letters from the State of NJ with bills for small amounts $45; $60; $85 and $275 (rough). All for things that honestly don't make sense. I believe all were related to property tax deductions. The State adjusted the clients property tax deductions with lower amounts stating their correct amounts. Amounts easily challenged with information reported on most 1098 forms or worse, simple internet searches. I believe Three out of the Four JUST PAID IT. I'm like what? Why? Why didn't you call me? Most said it wasn't worth the time or cost to waste time over. It would take more time, effort and cost than the bill itself. And they are right, in some small way I guees.. So, Shh.... I think the BOYS are using marketing skills (demographics?) to collect. Where 3/4 JUST PAY IT - The small amount$.. But I still bet It must costs them $123.50 to collect $50. Shame they can just can't see the forest through the trees.

I can only imagine when people with common sense are able to make real decisions in government. Hey, it could happen....

[Mike Mac]

It's not the feature that is the problem

Urgent Care, the problem is not that Proseries has the feature of carrying over prior year state tax information to the current year, they should. It is the fact that in 2010 they are CARRYING IT OVER WRONG. This problem is not the same as if the refundable credits were calculated correctly. The software is flat-out putting incorrect numbers in incorrect columns on the Carry Over Worksheet. Carrying numbers forward should be a fundamental process that we can depend on the company to get right (like adding one plus one and coming up with two rather than three).

As Bee's mentioned, it is even more frustrating because Intuit never came out with any messages to MN preparers even after they admitted it was a problem with their software.