Drake question

[peggysioux]

Drake software does not allow you to override the income tax vs sales tax deduction on Schedule A line 5. I have a taxpayer who purchased two new vehicles in 2014 so sales tax is slightly below income tax paid. Drake only calculates the larger of the two. While the income tax deduction is better for 2014 refund, taking the sales tax deduction instead will be more beneficial for the taxpayer in 2015. I am so surprised that Drake does not have an override programmed into the software. It also seems that many of the support people are not as knowledgeable as in past years. Have other tax preparers run into this issue and how have you handled?

Peggy Sioux

[duanecpa]

Sales Tax

Go to STAX - there is a place - Line 7 to enter specific sales tax paid on vehicles, etc.

Duane

[peggysioux]

Drake Question

I know where to enter the data; the issue is that the overall sales tax is lower than the income tax figure so Drake does not allow me to override and choose the sales tax figure. Apparently Drake only looks at current year figures and takes the highest figure but program should allow tax preparer to be able to override. It is more beneficial for this taxpayer to take a lesser deduction for 2014 because in taking the sales tax deduction, it will be more beneficial in 2015.

[JohnH]

If you make an entry to the "adjustment to avalable income" box on the State & Local General Sales Tax Deduction worksheet, that will reduce the calculated sales tax deduction amount. So if you reduce the income to zero with that entry, thus producing a zero calculated deduction, you can force your desired figure on lin 7 of the worksheet. You might need to play around with the entry to insure that the calculated sales tax deduciton is zero, then make your line 7 entry as the last step.

I don't knonw how this work-around might affect your carryovers and what happens next year, so you might want to look into that.

[ATSMAN]

I know where to enter the data; the issue is that the overall sales tax is lower than the income tax figure so Drake does not allow me to override and choose the sales tax figure. Apparently Drake only looks at current year figures and takes the highest figure but program should allow tax preparer to be able to override. It is more beneficial for this taxpayer to take a lesser deduction for 2014 because in taking the sales tax deduction, it will be more beneficial in 2015.

Try this if it works for you.

On Line 5 of the Sch A entry screen put -$amount equal to the state income tax withholding. That will force the software to use the Sales Tax even though it is lower than the actual state income tax withholding.

[JohnH]

ATSMAN has the answer.
(My suggestion won't accomplish what you're trying to do)

[peggysioux]

Drake Question

Try this if it works for you.

On Line 5 of the Sch A entry screen put -$amount equal to the state income tax withholding. That will force the software to use the Sales Tax even though it is lower than the actual state income tax withholding.

Thanks ATSMAN for the work-around. I still think that Drake should have programmed an override selection. The Drake support team didn't know how to deal with the issue (even after speaking with a manager) so I am very thankful for this board.

Much appreciated.

Peggy Sioux

[ATSMAN]

You are welcome. Generally speaking it is the higher of the state tax or sales tax that makes sense, but in your situation it was an exception. I agree that Drake should have an override selection to use sales tax even if state taxes are higher. But I suppose those of who know the trick get around that problem.

I am very surprised that the Drake reps did not know. I have found them to be very helpful and knowledgeable.

Did you post this question on the official Drake board. Generally Merry from Drake gives good advice.

[Lion]

There's also a separate Drake forum on the UNofficial ATX board:

http://www.atxcommunity.com/

[peggysioux]

Drake Question

You are welcome. Generally speaking it is the higher of the state tax or sales tax that makes sense, but in your situation it was an exception. I agree that Drake should have an override selection to use sales tax even if state taxes are higher. But I suppose those of who know the trick get around that problem.

I am very surprised that the Drake reps did not know. I have found them to be very helpful and knowledgeable.

Did you post this question on the official Drake board. Generally Merry from Drake gives good advice.

When I tried to post to the Drake board, notice displayed that "forum was not taking new posts" (very strange).

[ATSMAN]

Drake board has certain forums where new messages are not allowed but the Drake Software discussion forum is open to new posts.

[Roland Slugg]

It is more beneficial for this taxpayer to take a lesser deduction for 2014 because in taking the sales tax deduction, it will be more beneficial in 2015.

Really? Would you be good enough to explain why you think that is so?

[thomtax]

I have the same question as Roland.

LT

[DonPriebe]

Why better next year?

Really? Would you be good enough to explain why you think that is so?

Could be because by not deducting any state INCOME tax this year, any state income tax refund will be non-taxable next year.

[peggysioux]

Drake Question

Really? Would you be good enough to explain why you think that is so?

Taxpayer purchased two vehicles in 2014 which made sales tax deduction much higher than a normal year. Sales tax deduction was still slightly below income tax deduction, but if sales tax deduction is claimed rather than income tax deduction, the state refund is not included as income for 2015. Taxpayer is in 25% tax bracket with over an $8000 state refund. He will benefit in 2015 by not claiming the $8000 refund as income. By not claiming the $8000 state refund in 2015, taxpayer's income is such that he will be able to claim more of the child tax credit and a savings of $2000 in income tax at $8000 @ 25%. He is losing approximately $1200 refund for 2014 but will have a larger refund of $2400 in 2015; thus coming out ahead by $1200 overall.