Error in Tax Calculation in Schedule D (Form 1041) Tax Worksheet

The 2018 Schedule D Tax Worksheet in the Instructions for Schedule D (Form 1041) contained an error. The tax calculation did not work correctly with the new TCJA regular tax rates and brackets for certain Schedule D (Form 1041) filers who had 28% rate gain (taxed at a maximum rate of 28%) reported on line 18c, column (2) of Schedule D or unrecaptured section 1250 gain (taxed at a maximum rate of 25%) reported on line 18b, column (2) of Schedule D, and also had positive amounts in column (2) of lines 18a and 19. The corrected worksheet is at the end of the updated instructions at the link above. If you downloaded those instructions before May 16, 2019, you should download them again. All returns filed after May 15 should reflect the new calculation; the IRS has been updating returns since April 26 to reflect the correct tax using the new calculation. Because the IRS has already provided the corrected worksheet to its tax software partners, anyone filing a 2018 return, including those with extensions, after May 15, 2019, are not affected by the error.  The correction results in a lower regular tax for most affected taxpayers, and a higher regular tax for a small number of the impacted taxpayers, depending on the taxpayer’s individual return.

Note that most taxpayers filing Schedule D (Form 1041) do not have amounts on lines 18b and 18c and thus are unaffected.

Affected taxpayers need not file an amended return with the IRS or call the IRS. The IRS is reviewing all returns submitted prior to May 16 to see if the regular tax was figured incorrectly or not; more information will be provided about this review later. 

We corrected the Schedule D Tax Worksheet in the Instructions for Schedule D (Form 1041) by renumbering line 17 as line 17a, adding new lines 17b and 17c, and updating the text on line 18 to reflect those changes.  A Form 1040 taxpayer’s regular tax calculation using the worksheet is potentially impacted if:

  1.  Form 1041, Schedule D, lines 18a and 19 in column (2) are both more than zero; and
  2.  Form 1041, Schedule D, line 18b or line 18c is more than zero in column 2 (or both are more than zero).

Potentially impacted taxpayers may recalculate their regular tax using the new worksheet to see if it changes. However, the IRS is reviewing all potentially impacted filed returns; more information will be provided later.