Discrepancies in worksheets (both from IRS)

[ryanf1475]

Hello again,

I find myself needing to use the IRA Deduction Worksheet, but I found two versions which are frustratingly different:

#1: "Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2022" found here: https://www.irs.gov/publications/p590a#en_US_2022_publink1000230468

#2: "IRA Deduction Worksheet" found on page 91 here: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

These are both for the same purpose, right? And they are both for 2022. So why are they different, and why do I get very different results on each one? My tax software uses #2, but it's baffling to me how the IRS could have #1 out there if its...outdated? or mistaken? Can anyone explain this? (for the record, my MAGI is $76K, and I'm covered by employer plan)

Thank you,
Ryan

 

[Taxing Matters]

Hello again,

I find myself needing to use the IRA Deduction Worksheet, but I found two versions which are frustratingly different:

#1: "Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2022" found here: https://www.irs.gov/publications/p590a#en_US_2022_publink1000230468

#2: "IRA Deduction Worksheet" found on page 91 here: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

These are both for the same purpose, right? And they are both for 2022. So why are they different, and why do I get very different results on each one? My tax software uses #2, but it's baffling to me how the IRS could have #1 out there if its...outdated? or mistaken? Can anyone explain this? (for the record, my MAGI is $76K, and I'm covered by employer plan)

Thank you,
Ryan

I'm not sure which worksheets you mean. The worksheet 1-2 fom the Pub 590 is exactly the same as the worksheet 1-2 in the IRS instructions. So if you are using those you should get the same answer for each. But if you are using some other kind of worksheet, it may not be the worksheet you need. Usually if you have properly entered your information into a commercial tax prep program it will do the computations from the correct worksheet. It should be doing the same thing worksheet 1-2 does. The examples provided for worksheet 1-2 in the the publication and form instructions may help you work out where your problem is.

 

[LdiJ]

Hello again,

I find myself needing to use the IRA Deduction Worksheet, but I found two versions which are frustratingly different:

#1: "Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2022" found here: https://www.irs.gov/publications/p590a#en_US_2022_publink1000230468

#2: "IRA Deduction Worksheet" found on page 91 here: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

These are both for the same purpose, right? And they are both for 2022. So why are they different, and why do I get very different results on each one? My tax software uses #2, but it's baffling to me how the IRS could have #1 out there if its...outdated? or mistaken? Can anyone explain this? (for the record, my MAGI is $76K, and I'm covered by employer plan)

Thank you,
Ryan

Look at the titles to the worksheets you linked above. I was going to be more specific, but you linked the entire pubs, not just the worksheets and I am not going to dig through large pubs to provide you those details.

 

[Bali Hai Again]

https://www.irs.gov/pub/irs-news/at-01-39.pdf

 

[ryanf1475]

Look at the titles to the worksheets you linked above. I was going to be more specific, but you linked the entire pubs, not just the worksheets and I am not going to dig through large pubs to provide you those details.

Yes, this is what I'm trying to figure out. The titles are slightly different, but don't they serve the same purpose? What am I missing? I posted the forms here for convenience (https://ryansphotoperday.blogspot.com/2021/05/oid.html) (click on them to see them more clearly), but the real crux of the problem seems to be that in Pub 590 relies on MAGI, whereas the 1040 Instructions relies on a different formula that does not take into account excluded income from Form 2555 (FEIE). I have lots of excluded income in my case, so it makes a big difference. My tax software (H&R Block) uses the 1040 Instructions worksheet and gives me a more favorable result, saying that I can take the full deduction--but it goes against my pre-existing idea that the MAGI was supposed to be factored in somewhere. Thanks for any help!

 

[LdiJ]

Yes, this is what I'm trying to figure out. The titles are slightly different, but don't they serve the same purpose? What am I missing? I posted the forms here for convenience (https://ryansphotoperday.blogspot.com/2021/05/oid.html) (click on them to see them more clearly), but the real crux of the problem seems to be that in Pub 590 relies on MAGI, whereas the 1040 Instructions relies on a different formula that does not take into account excluded income from Form 2555 (FEIE). I have lots of excluded income in my case, so it makes a big difference. My tax software (H&R Block) uses the 1040 Instructions worksheet and gives me a more favorable result, saying that I can take the full deduction--but it goes against my pre-existing idea that the MAGI was supposed to be factored in somewhere. Thanks for any help!

If you will note the title on the first link states specifically that it is for calculating your "reduced" deduction. People who are employed by companies that have an employer's plan or who have a spouse that has an employer's plan may be limited on the amount that they can deduct. The second link is for the standard worksheet.

Your tax software, if you have accurately answered its questions and have inputted your data accurately is going to calculate your deduction accurately.

 

[ryanf1475]

If you will note the title on the first link states specifically that it is for calculating your "reduced" deduction. People who are employed by companies that have an employer's plan or who have a spouse that has an employer's plan may be limited on the amount that they can deduct. The second link is for the standard worksheet.

Your tax software, if you have accurately answered its questions and have inputted your data accurately is going to calculate your deduction accurately.

Right, but the standard worksheet also calculates the largest deduction (and for people covered by employer plan). So, they are functionally the same. But why does the standard worksheet (in 1040 Instructions) NOT take into account the excluded income from Form 2555, while the other worksheet does? This is the question that's driving me crazy.

 

[Bali Hai Again]

It appears that you will be subject to some IRA phase out. I advise to go with the H&R software as Ldij recommends and not try to over-think (analysis paralysis) the situation.

 

[Taxing Matters]

Right, but the standard worksheet also calculates the largest deduction (and for people covered by employer plan). So, they are functionally the same.

No, they are not. If you read page the instructions to Form 1040 for the IRA deduction carefully on page 90, third column, near the bottom it tells you: "If you were covered by a retirement plan and you file Form 2555 or 8815, or you exclude employer-provided adoption benefits, see Pub. 590-A to figure the amount, if any, of your IRA deduction." So if that is your situation, you cannot use the worksheet in the Form 1040 instructions, you need to use the worksheets from Pub 590-A instead, including the part calculating your reduced deduction. That's why the worksheets in the Form 1040 don't mention the Form 2555 — you need to use the worksheet in the publication that computes your reduced deduction. The IRS did that to make the worksheet in the Form 1040 instructions a bit less complex for the vast majority of taxpayers who don't have those reductions.

 

[ryanf1475]

No, they are not. If you read page the instructions to Form 1040 for the IRA deduction carefully on page 90, third column, near the bottom it tells you: "If you were covered by a retirement plan and you file Form 2555 or 8815, or you exclude employer-provided adoption benefits, see Pub. 590-A to figure the amount, if any, of your IRA deduction." So if that is your situation, you cannot use the worksheet in the Form 1040 instructions, you need to use the works from Pub 590-A instead, including the part calculating your reduced deduction. That's why the worksheets in the Form 1040 don't mention the Form 2555 — you need to use the worksheet in the publication that computes your reduced deduction. The IRS did that to make the worksheet in the Form 1040 instructions a bit less complex for the vast majority of taxpayers who don't have those reductions.

Ah, thank you! But that means H&R Block is wrong? I have checked the PDF version of my return before submitting (I haven't submitted yet), and they are clearly using the form from the Instructions, not Pub 509--and yet the Form 2555 is included in the return, so I know that I filed it. How can such a big and supposedly trusted company be wrong about this? It's baffling to me. In any case, thank you for this!!

 

[Taxing Matters]

Ah, thank you! But that means H&R Block is wrong? I have checked the PDF version of my return before submitting (I haven't submitted yet), and they are clearly using the form from the Instructions, not Pub 509--and yet the Form 2555 is included in the return, so I know that I filed it. How can such a big and supposedly trusted company be wrong about this? It's baffling to me. In any case, thank you for this!!

Were you covered by a retirement plan from your employer AND filed Form 2555? That's when you use the worksheet in the Publication.

 

[ryanf1475]

Were you covered by a retirement plan from your employer AND filed Form 2555? That's when you use the worksheet in the Publication.

Right, but HR Block is not using that worksheet from Pub 509. They are using the Instructions worksheet. I will try to re-do my Form 2555 to see if that changes anything. Maybe it's wrong because answered their questions out of order.

 

[Taxing Matters]

Right, but HR Block is not using that worksheet from Pub 509. They are using the Instructions worksheet. I will try to re-do my Form 2555 to see if that changes anything. Maybe it's wrong because answered their questions out of order.

When you use the software you need to be careful to read what the program is asking for and give it the right information. If you don't do things in the right order or you put in an answer because you assume you know what's supposed to go there you run the risk of making mistakes that will have a material impact on your return.

 

[ryanf1475]

FYI, I re-did the HRB sections and to no avail. I put in a request with customer service, should hear back in 48 hours. I think I'll be using TurboTax next year, unless this turns out to be my fault. Will let you know what they say.

 

[Bali Hai Again]

FYI, I re-did the HRB sections and to no avail. I put in a request with customer service, should hear back in 48 hours. I think I'll be using TurboTax next year, unless this turns out to be my fault. Will let you know what they say.

I use TurboTax. I have found that in some cases if inaccurate info is entered it remembers and I need to start a new return from scratch to get rid of the faulty info.

Please let us know what you discover.