Why is turbo tax putting qualified and ordinary dividends together?

[dalibella]

I imported 1099 div from vanguard and Turbo Tax bunched them together.  I thought they would be separate as they are taxed at a different rate. I could not find where to input the qualified dividends.

[VolvoGirl · Accepted solution]

Qualified dividends are in 1099Div box 1b.  

Even though the full amount shows up as income on the 1040,  if you have capital gains or qualified dividends the tax on line 16 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 worksheets to see it.

[dalibella]

Thanks for the answer,

I do not have schedule D on turbo tax deluxe. These aren't capital gains, just qualified dividends.  Vanguard bunches all dividends in one line and then in other lines specifies how much is qualified and how much is reits. I l looked at the 1040 and on line 3b lists the bunched ordinary dividends (including both qualified and reits ), while on line 3a lists just the qualified div. Now, when adding all income, it adds only whatever is on line 3b (the combined amount for all dividends). So, what happened to line 3a amount? How is it considered or will it be considered? It seems to be ignored as part of the total income, when it should be taxed at a lower rate. I am confused indeed.

[VolvoGirl]

I explained that.  The tax is calculated a different way.  There are over 7 ways to calculate the tax.  It does use Schedule D even if it is not required for filing.  

You can probably tell because the tax on 1040 will be less than the Tax Table

https://ttlc.intuit.com/community/forms/help/form-1040-line-11-amount-is-less-than-standard-irs-tax-...

[SteamTrain · Accepted solution]

Perhaps this will help.  Perhaps not.

Correct: The total $$ from box 1a on the 1099-DIV go directly to line 3b on the 1040.

This is the way it is handled for everyone....and all brokerages.

 That total is required to be there on line 3b by the IRS, and the total amount does add into your full AGI.

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The $$ from box 1b on the 1099-DIV, go to line 3a on the form 1040.

That tells the software, to treat that sub-portion of the total ordinary dividends in a special way on a separate tax calculation worksheet.  So it all works out properly the way the IRS wants it to be done.

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Calling the box 1a $$ "Ordinary" dividends confuses a lot of folks.

But that's up to the IRS.

[dalibella]

Hello,

Thanks for the answer. Is there a way to take a look at the special worksheet? No one seemed to know about it, including the IRS (I called them and explained what I explained here... well that person could not understand my question). 

Thank you very much again.

[SteamTrain]

Well, yeah, but it's easier when using the desktop software, because those folks have a "Forms Mode" tha lets them look at all their worksheets at any time.

Online users can get copies of all their forms and worksheets by going to the left side TaxTools menu, then selecting Print Center, and downloading a PDF of all their forms and worksheets to their own computer and looking at the worksheets there.  OF course, if using a pay-for-it version of TTX, you will be prompted to pay for the software first (if you haven't already done so)

The tax worksheet you are "probably" looking for, would be the "Qualified Dividends and Capital Gain Tax Worksheet"...But we can't know for sure it will be that one, as we can't know exactly what is in your tax file.

You'll have fun figuring out how that worksheet ...works.

[Hal_Al]

Q. So, what happened to line 3a amount? How is it considered or will it be considered?

A. It goes to line 2 of the Qualified Dividends and Capital Gain Tax Worksheet, where is used to calculate your income tax based on long term capital gains rate. 

You seem to be expecting to see the qualified dividends somehow broken away from your total and adjusted gross income on form 1040. It doesn't work that way. 

[Bette5]

I have the same problem.  Seems like a software problem and no where to contact a technician.

[BillM223]

"I have the same problem." You have what problem? The champs above explained why dividends are handled the way they are - it's because TurboTax is following the IRS rules.

What would you want us to do differently?

[VolvoGirl]

There isn't a problem.  Turbo Tax is doing it right.  What is  your specific question?

IRS Qualified Dividends and Capital Gain Tax Worksheet—Line 16 on 1040 instructions page 36
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

And you might need IRS Tax Table page 15 to calculate the tax and to compare to Turbo Tax.   That isn't shown in Turbo Tax.

https://www.irs.gov/pub/irs-pdf/i1040tt.pdf 

[VolvoGirl]

@BillM223  Can you ask TT if they can provide the IRS  Tax Table Worksheet to show the actual tax calculations?  That's been bugging me.  Seems like it would be a simple thing to fill out the chart with the return's figures.

IRS Tax Table page 15 to calculate the tax and to compare to Turbo Tax. That isn't shown in Turbo Tax.
https://www.irs.gov/pub/irs-pdf/i1040tt.pdf

[Tollmas]

TT tax is very clearly treating my qualified dividends as ordinary income.  I've tried putting the figures manually and also imported, but with the same result.  Volvo, have you actually looked at what rate your qualified dividends are being taxed at?   Becuase I agree with those who say TT does not reflect the reduced rate.   Will reach out to TT, but it doesn't sound like they are addressing the issue as it appears on older chatboards as well.

[Tollmas]

The problem is very clearly that TT does not treat qualified dividends any differently than ordinary dividends.  Several people have explained what TT should be doing, but have they actually tested it....because it clearly DOES NOT.

[Tollmas]

Maybe you should try a sample return that has low income where qualified dividends  should be treated as taxed at 0%.  You'll see that those qualified dividends are actually taxed as ordinary dividends.  There is a problem with Turbotax.