Qualified Dividends and Capital Gains Tax Worksheet or Schedule D Worksheet

[ABS- IL]

There have been several posts on this issue but it would seem that it still has not been resolved. My general income is relatively low but I have significant long-term capital gains this year.  On the TurboTax form 1040/SR wks , between lines 15 and 16 “ Tax Smart Worksheet” item 3: Schedule D Tax Worksheet is checked rather than item 4: Qualified Dividends and Capital Gain Work Sheet. This results in both my general income and long-term capital gains being taxed together as general income and pushing me into a far higher income bracket. Regardless of the fact that long term capital gains in my case should be taxed at 15% as would have been the case had item 4 been checked and the Qualified Dividends and Capital Gains Worksheet been used.

I have spent hours talking to TurboTax and although the various representatives have been as helpful as they could be and agreed with me - even elevating my query to “John” who simply told them that TurboTax has been around for 20 years and they stand by the accuracy of their calculations – the problem remains: the calculation seems to be obviously incorrect!  The Qualified Dividends and Capital Gain Work Sheet is in the system, but it appears impossible to override the checked item 3 on the Tax Smart Work Sheet.

[JamesG1]

The instructions at the top of the IRS Schedule D Tax Worksheet (page D-16) state:

Complete this worksheet only if line 18 or line 19 of Schedule D is more than zero and lines 15 and 16 of Schedule D are gains or if you file Form 4952 and you have an amount on line 4g, even if you don’t need to file Schedule D. 

Otherwise, complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 16, (or in the instructions for Form 1040-NR, line 16) to figure your tax. Before completing this worksheet, complete Form 1040, 1040-SR, or 1040-NR through line 15.

Does your tax return meet these standards for the Schedule D Tax Worksheet?

@ABS- IL 

[SteamTrain]

Did you look at your lines 18 and 19 on the Schedule D?

According to the actual IRS instructions for figuring the tax:

______

"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:
• You have to file Schedule D, and
line 18 or 19 of Schedule D is more than
zero; or
• You have to file Form 4952 and
you have an amount on line 4g, even if
you don’t need to file Schedule D. "

________

[Mike9241]

the reason for the schedule D worksheet is that with investment interest expense deduction, the deduction is limited to certain items of investment income.  primary interest, net short capital gains (to the extent they exceed net long-term capital losses) and nonqualified dividends. however, the taxpayer has the option of using qualified dividends and net long-term capital gains ( to the extent they exceed net short-term capital losses) to utilize more investment interest expense.  when this option is chosen, the amount of qualified dividends and net-long-term capital gains used are treated like they were short-term capital gains/non-qualifying dividends.