I was reviewing my sons 2021 tax return and noticed something odd. He makes under 40k and had $938 in qualified dividends (box 1b) on his VG 1099 which should be counted as cap gains and his tax rate should be 0% I think. But I see VG reporting $1007 in ordinary dividends (box 1a) which on the 1099 form shows it includes the qualified amount (box 1b) (so my assumption is only 1007-938 or $69 should be ordinary and added to his income.
So that $1007 (it's in box 3B on the 1040) appears to be added to his income instead of the $69. Is this right? It doesn't seem right.
Shouldn't VG exclude qualified from Ordinary on their 1099 which loads automatically into TT?
Deductions & credits
Ok ... you need to understand the way these are handled on the tax return ... he earned 1007 of total dividends OF WHICH 938 "qualify" for long term cap gains tax treatment ... the way it is reported on the 1099-DIV is correct and you MUST enter it just that way in the program or you will get an IRS letter later.
Now ... the program will enter the total dividends on the form 1040 line 3b and the qualifying div on line 3a. The total on line 3b will be included in the total AGI and that is correct. When it comes to calculating the tax liability it will be done on the Qualifying Dividends and Capital Gains Tax Worksheet so be patient and review that form to see how that works in the end.
