Section 1250 Gain - Spidell

Section 1250 Gain

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Message Board Section 1250 Gain

This topic contains 2 replies, has 2 voices, and was last updated by Roma Scott 2 months, 1 week ago.

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  • #160857

    It appears that section 1250 gain is being taxed at a flat 25% using the IRS worksheets even if the ordinary tax rate is less than 25%. This doesn’t seem correct because if the gain was short term the taxpayer would pay tax at their ordinary rate. It does not appear that this form changed with the new tax reform. Has anyone else encountered this? Does this seem correct?

  • #160948

    This is a known problem with the Schedule D Tax Worksheet for 2018. (not the Qual Divs and Cap Gains worksheet, but the other more complicated one).  There are new cap gains tax brackets under TCJA (they were always tied to regular tax brackets before) and the regular brackets also changed significantly.

    One pro software vendor (UltraTax) has released a fix already and says IRS will post this info tomorrow at the IRS web site.  IRS will review returns filed with the error, they are not telling anyone to amend as of now, maybe they can make corrections automatically and send refunds (which shouldn’t be that hard with all the other return amounts available).  It doesn’t affect very many taxpayers, which is probably why it took so long to discover.

    The problem was first posted publicly by a CPA in Michigan, (requires login to FB to view)

  • #161185
    Roma Scott

    Thank you for your response. We discovered this problem in February and called Prosystem and the IRS and neither one seemed to think there was a problem with the calculation. Since it did not affect many taxpayers, we put the ones that it did affect on extension hoping the IRS would fix it.