MI pension deduction

[joanmcq]

TP has a $12,000 early IRA distribution used to pay for his daughter's tuition. There's no penalty on the federal side because it was used to pay for higher education. MI gives a deduction for amounts paid out of IRA for higher ed, so he gets a $12,000 deduction on Sch 1 line 20. Software (not ATX) is also giving deduction on line 12 for qualified retirement plan. He is only age 48, and from reading the instructions, it seems to be a qualified distribution he must be over age 59.5. Also, it doesn't seem right that he would get two deductions for the same amount if he was over age 59.5 for the same distribution. Am I right, or is the software right?

[taxtrio]

Only allowed to subtract amount included in AGI, sorry you cannot "double dip" as they say.

And ATX only subtracts pension that YOU mark as qualified... and this is not a qualified pension subtraction on the pension line.

I commend you on noticing the subtraction for the education expenses as "misc subtractions" and imagine a lot of preparers miss that one.

Good for you.

P.S.

[joanmcq]

The software is not ATX; it is a, shall we say, popular DIY brand return that I am fixing. And trying to figure out why it did what it did. Seems that no matter what age you enter, as long as you have an IRA distribution, this software automatically takes the pension deduction. And this isn't the only return; this is the third MI audit we've gotten on the same issue.

[joanmcq]

Ok, add another one; we have 4 audits now. This one COULD be input error or qualified because it looks like it is a 401(k) or other plan, but the same form. Another reason not to ask the box!

[kcjenkins]

That is the basic problem with all the DIY software, the users don't understand the tax code well enough to recognize when something is wrong, which is often just a matter of checking or not checking the correct box. Software can make the mechanics of tax returns easy, but it can not make decisions for the user. So unless the user understands the tax issues, and the options, they often end up making serious mistakes. But, hey, the returns LOOK great. Very neat and all the math is good.