Has the IRS said that TurboTax handles qualified dividends incorrectly?

[brownie3]

The IRS applied the regular tax rate to my qualified dividends and not the 0% rate.

[VolvoGirl]

Turbo Tax calculates it right.  Maybe you entered the dividends wrong and not as qualified?

Even though the full amount shows up in the total income on the 1040 line 7, if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from Schedule D. The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet. It does not get filed with your return. In the online version you need to save your return as a pdf file and include all the worksheets to see it.

[brownie3]

TurboTax put us into for 1040-SR.  We input the dividends correctly and the Qualified Dividends and Capital Gain Tax Worksheet shows the calculations.  We called the IRS and they said there has been a lot of trouble with TurboTax and qualified dividends and that we had to pay.  I researched how qualified dividends are taxed like capital gains and based on the income level the capital gains rate is 0%.  On Form 1040-SR the qualified dividends are on line 3a and are also on line 3b.  All our dividends were qualified on each 1099 received 

[VolvoGirl]

That sounds right.  Line 3a is the part (or all) of 3b that is qualified.  So that's right.  No one else  has asked about this before.   Sorry I don't know what the problem could be.  You say the Qualified Dividends and Capital Gain Tax Worksheet is right?  Then the IRS must have changed something else on your return.  

[brownie3]

The IRS representative said this has been a big issue with TurboTax.  I went online to see if there was any chatter about this being an issue, and I did not find any comments at all.  Maybe the representative did not understand and only asked if we would pay by credit card.  What I plan to do is send a check and send a copy of the return and the qualified dividend worksheet with a letter of dispute, and fight to get the amount back.  Was the representative right in saying that the IRS has had a problem with how TurboTax is handling qualified dividends, or was it just a line to get us to pay?

[VolvoGirl]

Are you sure you talked to the real IRS? Did they send you a letter?  I would wait for a letter in the mail saying what is wrong and if you owe more.  Don't ever give your credit card number over the phone.

You can Contact Turbo Tax Customer Service
5am-5pm Pacific Time
Monday-Friday
https://support.turbotax.intuit.com/contact/

What is the Turbo Tax phone number
https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632

[macuser_22]

The IRS rep is talking through their hat.   For one thing the IRS rep has no idea how you filed, and second the calculation on the qualified dividend worksheet are correct - did you look at it?     What do you think is wrong? what lines on the worksheet are not correct?

[brownie3]

Thank you. I verified the calculations on the worksheet are correct.  I also researched the treatment of how qualified dividends are handled.  I am confident in how it was calculated, but the response from the representative surprised me. They are demanding payment, and the clock is ticking. I think my course of action is to send a check and write a letter disputing the notice.

[VolvoGirl]

So did you get a letter from the IRS with a tax due? Watch out for scams.  What does it say?  Maybe it's for something else not the dividends.  

A common adjustment is if you claimed the Recovery rebate credit on 1040 line 30 when you already got the Stimulus payment or got the second one after you filed or reported the wrong amounts or entered them in the wrong box.  Do you have an amount on line 30?

[mesquitebean]

@brownie3wrote:  "The IRS applied the regular tax rate to my qualified dividends and not the 0% rate"

As VolvoGirl mentioned, how did you originally find out the IRS had an issue with your return?  How did they contact you?

Where did you get the phone number you used to phone the IRS?   Are you sure it's legitimate? 

While it's possible to reach a live person at the IRS, it has been very difficult for most people to talk to an IRS agent.   The question about an agent asking about your credit card raises some suspicion.

[brownie3]

I know the scams are very sophisticated, but it’s a letter notice from the IRS and the [phone number removed] number on the notice seemed to be an authentic IRS number when I Googled the number.  This is for the 2019 tax return, there was no recovery rebate credit.

[mesquitebean]

You may wish to talk to TurboTax free Audit Support Center.   They can help you in evaluating and responding to an IRS letter.   They can advise you on what all you need to do.

https://support.turbotax.intuit.com/irs-notice/audit-support/

At that page click the blue "Get Help" button and follow the prompts to get the phone number and hours.

[brownie3]

I thought the same thing about the credit card.  Is there a way for me to find out if this is legitimate?

[mesquitebean]

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@ brownie3 wrote:

I thought the same thing about the credit card.  Is there a way for me to find out if this is legitimate?

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Go over your letter with the folks at TurboTax free Audit Support Center as I mentioned above.  We were probably typing at the same time.

[macuser_22]

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@brownie3 wrote:

Thank you. I verified the calculations on the worksheet are correct.  I also researched the treatment of how qualified dividends are handled.  I am confident in how it was calculated, but the response from the representative surprised me. They are demanding payment, and the clock is ticking. I think my course of action is to send a check and write a letter disputing the notice.

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For what tax year?  If 2020 then the IRS will not send audit letters before late 2022.

Are you sure the letter is actually from the IRS?  Goggle the return address on the letter to be sure it is the IRS.

If it is, then do not send a payment, just answer the letter and mail your dispute to the IRS address on the letter with the case number on your letter.