Lacerte State and Local Refunds Taxable Workheet Line 4 Error?

Forum|Forum|6 years ago
February 29, 2020
1 reply
9 views

Has anyone else had this issue?

Lacerte 2019 Program, State and Local Refunds Taxable in 2019 Worksheet. Line 4, State/Local Taxes Included on Prior Year Sch. A, Line 5E. The 2019 program shows a different amount than the 2018 program. It should just be pulling it over from 2018. As a result, where the 2018 program calculates that my client's SALT refund is taxable in 2019 (yes, he itemized), the 2019 program calculates that 0 is taxable in 2019. Essentially, the 2019 program alters the input to the calculation, and ends up with a very different result.

I have read Pub 525 and done the worksheets referenced there and I keep coming back to the same result as the 2018 program..... that the refund should be taxable in 2019.

Thanks.

Lacerte Tax

This topic has been closed for replies.

George4Tacks

Level 15

Did you lock the 2018 return? Does the two year comparison match the actual return that was filed? Look at the General Information created in the 2018 return and at the worksheet created in the 2019 return. You can create the worksheet, if you don't see one by entering a 2 = with worksheets in the first item after Refunds Taxable in 2019 Worksheet. Possibly the new $10K haircut on taxes played a role.

Answers are easy. Questions are hard!

N

nolacpaAuthor

Level 2

Thanks so much for your reply.
Yes I locked the 2018 return after filing.
Tax Summary in 2019 (2y comparison) ties to 2018.
I use the General Information sheet and it looks fine as well.
I definitely think it has to do with the 10K haircut. I did figure out the math:

2018 program: on the State Refunds Taxable in 2019 worksheet, the program allocates state income tax and real estate tax to the 10K max based on relative percentage of actual total.

2019 program: on the State Refunds Taxable in 2019 worksheet, the program allocates 100% of the prior year real estate taxes to the 10K, then whatever is left is allocated to prior year state income tax. So the program is cherry picking which taxes were deducted in the prior year’s 10K max. This method is more favorable for the taxpayer in 2019.

What I’m not sure about is whether the new regs on the 10K limit permit the taxpayer to decide which taxes are deducted in the 10K. I suspect this is permitted, and that Lacerte is taking the most favorable route for the taxpayer, but I’m not sure. Have to research more. Thanks again.

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