VA state Sch A deduction disallowed

[Possi]

I think VA has lost it's mind. 

I went to a CE program where the VA state rep said the the SALT would NOT be limited on the VA state Sch A. Honestly, I haven't even watched it shake out. 

My client just got a letter from VA state saying the MIP was disallowed. I have been all over that website looking for anything saying this is disallowed. It was not an issue at the seminar, not even brought up at the seminar. 

Has anyone else had this problem? 

[Hahn1040]

see TAX Bulletin 20-1

https://www.tax.virginia.gov/sites/default/files/inline-files/tb-20-1-date-irc-conformity-advanced.pdf?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

Further Consolidated Appropriations Ac tOn December 20, 2019, Congress enacted the Further Consolidated Appropriations Act, 2020 (H.R.1865). The legislation provides tax relief to victims of certain 2018 and 2019 disasters, makes significant changes to several retirement tax provisions, and repeals unrelated business income tax on specified fringe benefits. Advancing the date of conformity to December 31, 2019, will allow Virginia to conform to these provisions.The federal legislation also extends for three years over 30 tax provisions, commonly known as "extenders," which generally expired at the end of 2017. These provisions include the following:Virginia Tax Bulletin 20-1 February 18, 2020Page 2 •The above-the-line deduction for qualified tuition and related expenses for higher education; •Exclusion from gross income of a discharge of qualified principal residence indebtedness; and•Treatment of qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction.Advancing the date of conformity to December 31, 2019, will allow Virginia to conform to these extenders.

Virginia’s Deconformity from the Increased Medical Expense Deduction:  While taxpayers may continue to claim an itemized deduction for medical expenses on their Virginia returns, Virginia will deconform from the reduction of the deduction floor.

[Possi]

So, am I reading this right that VA is honoring the IRS extenders?

[Lion EA]

Except for the medical 7.5% floor...

[Possi]

31 minutes ago, Lion EA said:

Except for the medical 7.5% floor...

Yup, that's how I read it. I'll call Richmond in the morning and see what's going on. 

Thanks, y'all!

[TAXMAN]

That was the way I read the bulletin. Lets us va people know whats going on please. By the way several of my returns went through with the amounts above the cap but still subtract out sales tax and withholding tax.

[Hahn1040]

Perhaps your client's letter was generated before VA Tax had the bill from the General Assembly with the conforming items.  That notice is dated 18 February, but I had read it elsewhere before that.

RE: The sales tax vs. state tax subtraction on line 18 of the VA sched A:  At the start of the year, ATX was subtracting both Sales tax and State tax.  I called VA Tax  on 2/3/2020 to ask about it and was told that the software was correct.  Then about a week later, ATX changed the software.... so I called again on 2/14/2020 and was told that sales tax is NOT subtracted on line 18.  Each time, the person I spoke with had to go ask a supervisor.  This was not an issue that was on their radar because it was not a change.  In the past, when we used sales tax we did not have to deduct it.  The big change for us and for VA Tax is that before last year, there was not a separate schedule A - any changes from federal were adjusted on the 760.  Even on the 2018 Schedule A   there were no adjustments on the Schedule A.  They were done on the 760. 

 I would say that if you have already filed returns that had sales tax subtracted on line 18, I would give them a look to see what difference it would make for the t/p.  if it is material you might want to amend.  Certainly VA Tax is not going to make the change.  They did not make any adjustments on the 2018 returns when they changed the calculation of line 11 on the 760 in mid-season which made it more favorable to the t/p.

I confirmed each time I spoke with them, that they were using the 10% for medical rather than the federal 7.5%.  But at least they started the year with that rate compared to 2017 when they changed  mid-February and t/p were getting adjustments because we had already filed.

Possi, In your position I  would certainly call on behalf of the t/p and do not give up until you find a person who realizes the  VA Tax error and will make the correction.

[Possi]

On 2/23/2020 at 7:07 PM, Hahn1040 said:

Possi, In your position I  would certainly call on behalf of the t/p and do not give up until you find a person who realizes the  VA Tax error and will make the correction.

I called alright. Not only did they mess up that return, but they have messed up the VA worksheet calculations and changed other returns as well. 

I contacted TaxWise after talking with a rep in Richmond. He is blown away as well. 

So the software isn't dancing with the state who is not dancing with anyone. Basically, all my VA returns with a VA Sch A and all my return with deductible MIP will be changed, making ME appear bad. 

Monday was a flat tire day with all this going on, between Richmond and TaxWise. 

 

[BulldogTom]

3 minutes ago, Possi said:

I called alright. Not only did they mess up that return, but they have messed up the VA worksheet calculations and changed other returns as well. 

I contacted TaxWise after talking with a rep in Richmond. He is blown away as well. 

So the software isn't dancing with the state who is not dancing with anyone. Basically, all my VA returns with a VA Sch A and all my return with deductible MIP will be changed, making ME appear bad. 

Monday was a flat tire day with all this going on, between Richmond and TaxWise. 

 

Not fun.   Sending sympathy from CA.   Would take you out for a cocktail or glass of wine but the flights are too long.   Hang in there girl.

Tom
Modesto, CA

[Hahn1040]

Possi, Are you saying that Virginia Tax is saying that MIP is not deductible for VA? 

That is not what that Bulletin 20-1 says!

[Possi]

3 hours ago, Hahn1040 said:

Possi, Are you saying that Virginia Tax is saying that MIP is not deductible for VA? 

That is not what that Bulletin 20-1 says!

IKR! They disallowed the deduction because VA does not have that line on their Sch A yet! 

On my copy, the VA Sch A says "reserved," but talking to Richmond, the entire line disappears in the transition because the great state of VA doesn't even have the line. 

Buckle up, VA preparers. 

[M7047]

I don't normally have VA returns. I found this information for 2019, would I do the same for the 2018 that needs amended too? Thanks!