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2210 AI not adjusting for Schedule 1-A items

Larry19

With all the new adjustments this year handled on Schedule 1-A (No Tax on Tips, No Tax on Overtime, and the Enhanced Deduction for Seniors), the IRS's way of dealing with them on 2210 Schedule AI was to tell you to just adjust for them when going from Line 13 which is essentially your annualized taxable income before the Schedule 1-A and Line 14 which is the annualized income tax (from the instructions for Line 14: "You may adjust your 2025 taxable income here for any provision you did not account for elsewhere on Form 2210 before calculating your 2025 tax subject to underpayment of estimated income tax. Schedule 1-A (Form 1040) 2025 provides for new additional deductions for qualified tips, qualified overtime compensation, qualified passenger vehicle loan interest, and the enhanced deduction for seniors." FreeTaxUSA is making no adjustment here and ignoring that my wife and I qualify for th enhanced senior deduction; consequently, the amount it calculates was due each quarter is higher than it should be.

Since I'm new to FreeTaxUSA this year, I'm running a side-by-side comparison with my old tax software. My old tax software is getting it right. As an example, both my old software and FreeTaxUSA have $98,664 on line 13 for Q1 but for Line 14 (annualized income tax) my old software has $9,918 while FreeTaxUSA has $11,537 with that difference being that my old software is deducting the enhanced senior deduction (per the IRS instructions quoted above) while FreeTaxUSA is not.

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Comments

MatthewD

Hi Larry19,

Thank you for your feedback. Generally, the best way to report an issue like this is through our Customer Support portal while signed into your FreeTaxUSA account.

I have reported your concern and feedback to our team that looks into issues like this.

MatthewD

Hi Larry19,

I got word, this issue has been fixed and will be published to the software by Friday, 2/26/2026.

Larry19

Thanks. I will check it out on Friday. And thanks for the information on how to better report problems (as I said, my first year trying FreeTax USA).

Larry19

And I see that change is now in and the numbers I am getting match what I expect to see. And my further digging into the numbers says the tax software I am comparing to does not have it completely correct (my wife had a whopping $19 in qualifying overtime; FreeTaxUSA asks for what quarters that was in while the other software I am using appears to be assuming it was all in Q1). So well done.

RandomGuy

I believe the Schedule 1-A deductions are not handled correctly just yet. FTUSA prompts for cumulative figures for the four tax quarters, but the cumulative numbers must be ANNUALIZED before they are used.

It is unclear whether the user or the program should do this.

Certainly the FTUSA prompts do not suggest that the user must do it, but if he does not schedule AI line 14 is incorrect, because FTUSA uses the raw inputs without annualizing them.

I've created a support ticket for this.

Larry19

I agree with RandomGuy. I dug into the numbers and they are treated as annualized numbers, not cumulative numbers.

Let’s say I had $100 of qualifying overtime, all earned in Q1. So the cumulative numbers for the four quarters are $100, $100, $100, $100. But when you annualize, you assume everything will be the same for the rest of the year. So at the end of Q1, I assume my annual overtime will be $400 ($240 at the end of Q2 and $150 at the end of Q3).

For the additional senior deduction, cumulative doesn’t even make any sense. It’s an annual amount and how much of it you get depends on your income. With annualized income, you could qualify for the whole thing in one quarter but not qualify for it in full at the end of the year (this could easily happen if most of your income was in Q4). FreeTaxUSA should be able to calculate how much should be applied each quarter based on the cumulative income you report for each quarter.

RandomGuy

https://community.freetaxusa.com/discussion/comment/7021#Comment_7021

You make a good point about the senior deduction. As you suggested a better design would be to omit any inputs on 2210 about the senior deduction. It's simply confusing and above the average user's ability to properly handle at this high abstraction level. Of course there are caps on Tips as well.

The bottom line I think is that these tax changes were implemented without proper technical guidance from the IRS regarding the implications to form 2210. This has clearly led to vendors having to read between the lines for their own solutions to the vagueness.

What SHOULD have happened is that the IRS should have redesigned 2210 to clearly and precisely accommodate Schedule 1-A.

RandomGuy

https://community.freetaxusa.com/discussion/comment/7029#Comment_7029

And actually, there are income phaseouts on all four of the Schedule 1-A deductions. With FTUSA's current Schedule AI implementation it is on the user both to annualize each quarterly number AND apply any appropriate phaseout. It seems he must essentially work through form 1-A four times, once for each of four sets of annualized figures and adjust the annualized deductions if necessary.

Given the cumulative figures for the four categories, all of that COULD be done by the software as well; but since the software does not annualize them we know that's not happening.

Larry19

I completely agree that 2210-AI should have been redesigned. But I'm sure the IRS form designers had their hands full.

Fortunately for me, we easily get to zero penalty without these extras (since our Q1 and Q2 estimated payments were made before the additional senior deduction and no tax on overtime were law and by Q3 were so far ahead no payment was needed even without those deductions) so it's a "don't care" for this year. But 2026 will be different since the additional senior deduction is being taken into account when determining our estimated payment.

Larry19

https://community.freetaxusa.com/discussion/comment/7030#Comment_7030

To provide an example of what can happen, let's assume MFJ and income in Q1, Q2, and Q3 of $25,000 each quarter and $225,000 in Q4.

In Q1, YTD income was $25,000 which annualizes to $100,000 so you qualify for the full additional senior deduction when calculating your annualized tax.

In Q2, YTD (five months) income was $50,000 which annualizes to $120,000 so you qualify for the full additional senior deduction when calculating your annualized tax.

In Q3, YTD (eight months) income was $75,000 which annualizes to $112,500 so you qualify for the full additional senior deduction when calculating your annualized tax.

But for full year, income was $300,000 so you do not qualify for any of the additional senior deduction.

Henry

I'm glad RandomGuy was able to create a support ticket to address this issue with our Customer Support team. That will enable them to review your forms and see if changes are needed in the software.