Correcting doing Forms & Schedule(s) for Capital Gains

[G-dog]

This is the first year I have done a withdrawal from investments (post-tax account). 

simple withdrawal - all shares bought several years ago on one date, all sold same date

In doing taxes, I have done Form 8949 (list asset and details), and Schedule D. But it looks to me that I am not getting LTCG taxed at 15%, but at our higher tax bracket rate.   Any idea what I am doing wrong?

[NotJen]

Did you fill out the Qualified Dividends and Capital Gain Tax Worksheet?

[G-dog]

Did you fill out the Qualified Dividends and Capital Gain Tax Worksheet?

I tried - it was confusing so I am not sure I did it correctly.  The other worksheets cited don’t apply.
Is that worksheet where I would somehow get the number for 15% tax. 

I do have a few hundred in STCG.  I don’t understand why the forms have you add STCG and LTCG.   

Do you have a source for a really simple example to use as a guide?

[secondcor521]

@NotJen is right.  You either need to fill out that worksheet, or the Schedule D worksheet in the Schedule D instructions.  One of those will apply to you, and it'll get you the lower tax if you fill it out properly.

Refer to page 33 of the Form 1040 instructions of the PDF here:  https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

[G-dog]

@NotJen is right.  You either need to fill out that worksheet, or the Schedule D worksheet in the Schedule D instructions.  One of those will apply to you, and it'll get you the lower tax if you fill it out properly.

Refer to page 33 of the Form 1040 instructions of the PDF here:  https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

That’s what I tried - the hooded part is the key, I don’t think I have done it properly —- yet. It really doesn’t help for for worksheet and instructions to refer to other Forms and such without any description of what that Form does (line 2 of the worksheet).

[secondcor521]

Did you fill out the Qualified Dividends and Capital Gain Tax Worksheet?

I tried - it was confusing so I am not sure I did it correctly.  The other worksheets cited don’t apply.
Is that worksheet where I would somehow get the number for 15% tax. 

I do have a few hundred in STCG.  I don’t understand why the forms have you add STCG and LTCG.   

Do you have a source for a really simple example to use as a guide?

It is confusing and complicated.

On the Qualified Dividends and Capital Gains worksheet, you basically figure your taxes two ways.  One way is assuming all of your taxable income is taxed at ordinary rates.  The second way is calculating capital gains rates on the portion of your taxable income that is preferenced.  At the very bottom of the worksheet, you compare both methods and get to use the one that is better.

The amount of your income that is taxed at 15% should be the number on line 17 of that worksheet, and the actual tax (15% of that number) ends up on line 18.  This ends up getting added in with your ordinary income taxes on your ordinary income (line 22), and any income taxed in the 20% capital gains bracket if you have that high of an income (line 21).

If you've done it right, the total on line 23 will be lower than the number on line 24, and the number from 23 will carry down to line 25 and be copied onto the "tax" line of your 1040.

Where are you seeing STCG and LTCG added together?  I'm guessing it's probably on Schedule D, and that probably has to do with the fact that ST and LT stuff is lumped together (i.e., they offset each other) before being fed into other parts of the tax process.  That's normal, and expected, and how the tax law works.

[secondcor521]

@NotJen is right.  You either need to fill out that worksheet, or the Schedule D worksheet in the Schedule D instructions.  One of those will apply to you, and it'll get you the lower tax if you fill it out properly.

Refer to page 33 of the Form 1040 instructions of the PDF here:  https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

That’s what I tried - the hooded part is the key, I don’t think I have done it properly —- yet. It really doesn’t help for for worksheet and instructions to refer to other Forms and such without any description of what that Form does (line 2 of the worksheet).

I can walk you through it.  First job is to look at page 33 and figure out which worksheet to go to - either the Schedule D worksheet or the Qdiv and Cap Gains one.  It'll probably be the Qdiv and Cap Gains one, but you'll have to look at your Schedule D to figure it out.

Once we know which worksheet you're doing, we can figure out what you mean by line 2 of the worksheet ;-)

[G-dog]

@NotJen is right.  You either need to fill out that worksheet, or the Schedule D worksheet in the Schedule D instructions.  One of those will apply to you, and it'll get you the lower tax if you fill it out properly.

Refer to page 33 of the Form 1040 instructions of the PDF here:  https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

That’s what I tried - the hooded part is the key, I don’t think I have done it properly —- yet. It really doesn’t help for for worksheet and instructions to refer to other Forms and such without any description of what that Form does (line 2 of the worksheet).

I can walk you through it.  First job is to look at page 33 and figure out which worksheet to go to - either the Schedule D worksheet or the Qdiv and Cap Gains one.  It'll probably be the Qdiv and Cap Gains one, but you'll have to look at your Schedule D to figure it out.

Once we know which worksheet you're doing, we can figure out what you mean by line 2 of the worksheet ;-)

I printed the QD & CG worksheet (I had been doing it on-screen).  I am working through it on paper.  One thing that trips me up is that line 12 = line 16 for me (to be entered on line 17).  I will finish it and maybe the fog will clear!

Finished it - I still am not sure why the worksheet is done this way (why the calculation(s) are structured this way).  But I saved about $3000 by checking. 

So - what do you put at 1040 Line 16 ("Check if any from Forms) - I think I should check Box 3 and try to put in the worksheet name (though the worksheet is NOT a form).

[secondcor521]

The worksheet has to handle all situations and combinations of how ordinary income and capital gains and qualified dividends can interact with the three capital gains brackets.  In simpler situations, it's quite typical that some lines end up with the same values.

You don't need to check any boxes on line 16.  As you correctly note, the worksheet is not a form.  The IRS can figure out for themselves that you used the Qdiv and Cap Gains worksheet and they can replicate the math if they want to double check it.

As long as you're careful, go slowly, follow the directions, and maybe double check your entries a day later (or have a second set of eyes do so), you'll probably get it right.  Another option would be to put all of your entries into a tax preparation program that lets you look at that worksheet - one of the free filing options might let you do that without paying anything, although it may be a bunch of data entry to get that far.

[G-dog]

Thanks @NotJen and @secondcor521 - doing the worksheet with pencil and paper (with your confirmation that it was the right sheet to use) did the trick.  I will double check it as recommended. 

Trying to do it online was just not working this time. 

Luckily I could use the tax tables, instead of having to do ANOTHER calculation. I also checked to make sure that my state taxes don’t use this info.  It is too easy to overlook at least one use of the updated data.

[phildonnia]

I made a Google sheet to model the Schedule D tax worksheet.  It saves lots of time if corrected or updated figures come in.  There's really only five or six inputs to the calculation.

I would consider posting a link here, but I don't want any liability if there's a mistake on it.  Surely someone has made something similar available online?

[G-dog]

I made a Google sheet to model the Schedule D tax worksheet.  It saves lots of time if corrected or updated figures come in.  There's really only five or six inputs to the calculation.

I would consider posting a link here, but I don't want any liability if there's a mistake on it.  Surely someone has made something similar available online?

Not sure about liability issues.  I mostly found videos when seeking examples for different forms and such. Also found examples using forms / sheets from other tax years. Lots of info from professional tax prep services or software, but it’s just general info because they want to sell you something. Though they would have concerns about liability too.

[secondcor521]

If you have Excel or equivalent, this one is really nice:

https://sites.google.com/view/incometaxspreadsheet/home/download

It looks like it does the Qdiv and Cap Gains worksheet on the 20th tab of that Excel spreadsheet.  You have to give it enough information to work with, but if you have your 1040 done far enough, you can put in what you have and double check your worksheet against the one here.