I have discovered an error in the way that Turbo Tax Self-Employed On-line handles the sales of Collectible capital gains. When entering these sales, I select the "Other" Investment Type (1099-S) per the Turbo Tax instructions. Following this, I select Collectible from the "What type of investment did you sell?" dropdown. This should trigger this transaction as being handled as a collectibles sale however it does not.
In my particular case, this can be seen as follows: I have both a short-term capital gain (from collectibles) and a long-term-capital gain (from the sales of stocks and collectibles). This results in Schedule D, Line 17 showing "YES", which then directs one to complete Schedule D, Line 18 which states "If you are required to complete the 28% Rate Gain Worksheet (see instructions), enter the amount, if any, from line 7 of that worksheet." The instructions for Schedule D, Line 18 state:
If you checked “Yes” on line 17, complete the 28% Rate Gain Worksheet in these instructions if either of the following applies for 2021.
(a) You reported in Part II of Form 8949 a section 1202 exclusion from the eligible gain on QSB stock (see Exclusion of Gain on Qualified Small Business (QSB) Stock, earlier).
(b) You reported in Part II of Form 8949 a collectibles gain or (loss). A collectibles gain or (loss) is any long-term gain or deductible long-term loss from the sale or exchange of a collectible that is a capital asset.
In my case (b) applies. Completing the 28% Rate Gain Worksheet results in a value being placed on Schedule D, Line 18. However, at this point Turbo Tax does not calculate a 28% Rate Gain Worksheet and thus does not place a value on Schedule D, Line 18. This is in error.
Once one reaches Schedule D, Line 20, you are directed to use either the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet to calculate tax due, based on whether or not both line 18 and 19 of Schedule D are zero. In my case, I am required to use the Schedule D Tax Worksheet. This also follows as per the 1040 Instructions for Line 16:
"Schedule D Tax Worksheet. Use the Schedule D Tax Worksheet in the Instructions for Schedule D to figure the amount to enter on Form 1040 or 1040-SR, line 16, if:
(a) You have to file Schedule D, and line 18 or 19 of Schedule D is more than zero; or
(b) You have to file Form 4952 and you have an amount on line 4g, even if you don’t need to file Schedule D."
In my case (a) applies. So, The Schedule D Tax Worksheet is the correct tool to use for calculation of my tax. Turbo Tax does not do this however. It uses the Qualified Dividends and Capital Gain Tax Worksheet because it incorrectly determined that the 28% Rate Gain Worksheet was not required (when it is), and therefore did not place a value on Schedule D, Line 18. This (in my case) results in a significantly different (lower) tax due then if the correct Schedule D Tax Worksheet is used.
All of these issues, not completing the 28% Rate Gain Worksheet, not having a value on Schedule D, Line 18, Line 20 of Schedule D therefore being answered "YES" rather than the correct "No", and thus the use of the wrong worksheet to calculate tax, are all the result (symptoms) of having the transaction not correctly flagged as being for Collectibles, even though Collectible was chosen from the investment type dropdown.
One other thing I noticed which could help point to the root cause issue here, even though I started the investment entry by choosing "other Investment - 1099-S", ultimately when I see the completed entry in my list of Investments, it is labeled as Stocks, Bonds, 1099-B. If the program really is treating this and such, it would explain why the 28% Rate Gain Worksheet and everything else is not triggered.
I also have used a competitor's project (won't state which one here), and it correctly handled the sales of Collectibles, using the Schedule D Tax Worksheet, matching the results I have obtained upon manually completing all the various tax forms, schedules, and worksheets.
I did speak for over an hour with one of your CPAs yesterday about this issue but was blown off since he did not believe there could be an error in your programming. He also stated not to worry that I covered by the error free guarantee however I genuinely someone at Turbo Tax should care about this error existing in the program. SO, I would be glad to speak to someone else if anyone cares to get to the bottom of this issue of collectibles not being handled correctly in the software. Feel free to contact me.
