pandother
Level 2

Software glitch

I finished my return, but did not file.  Today I discovered a 1099-Div that had not been included, so I updated the return.  The new 1099-Div included $762 of dividends, so I expected my tax refund to decrease. However, it stayed exactly the same.  When I look at my list of 1099s, the new one is included. I think there must be a software problem since I can't think of any other reason that my income can be increased without increasing the tax liability.

‎April 22, 2021 5:08 PM
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rjs
Level 15
Level 15

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Are all, or almost all, of the added dividends qualified dividends? In other words, on the 1099-DIV that you added, is box 1b (qualified dividends) equal to, or almost as much as, box 1a (total ordinary dividends)? If your income is low enough, it's possible for qualified dividends to be taxed at a 0% rate.

 

‎April 22, 2021 9:11 PM
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pandother
Level 2

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Yes, the entire amount is qualified, but I think my income is too high for  0% tax.  Also, when I compared the original return (which I had already printed) to the new version, my taxable income (1040, line 15) is $762 more on the new version.  Thanks for your thoughts.

‎April 23, 2021 4:54 AM
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rjs
Level 15
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Qualified dividends are always included in taxable income (1040 line 15). The dividends may be "taxable" at a 0% tax rate, but they are still technically taxable. The calculation of taxable income does not take into consideration whether the 0% rate might apply. The rates are applied after the total taxable income is calculated. Is there any change in the tax on line 16 between the two returns?


For 2020 the 0% tax rate for qualified dividends and long-term capital gains applies if taxable income (1040 line 16) is up to $40,000 for single or married filing separately, $53,600 for head of household, or $80,000 for married filing jointly or qualifying widow(er). Note that it's based on taxable income, not total income or AGI.

 

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‎April 23, 2021 8:02 AM
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pandother
Level 2

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You have solved my problem!  I did not realize that the $80,000 limit for married, filing jointly, could qualify us for the 0% tax rate on dividends.  I thought it was based on total income, not taxable income.  The amount of tax on line 16 is indeed the same on both the original and the corrected versions of the return.  Thank you for your time and expertise.

‎April 23, 2021 9:19 AM
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