Just some quick background. I love FreeTaxUSA and usually they are pretty good. However, this evening when entering in my 1099-Bs I noticed there is a bug in the software when entering an adjusted basis value. I've already reported the bug to FreeTaxUSA and I'm sure they will have it resolved soon, but I figured I should get this warning out in case anyone is already working on their taxes like me.
Here's the summary of the bug. If you have a sale entry where the reported basis is incorrect, the software will prompt you to enter a new basis. It then uses this to compute the adjustment value for Form 8949 (column g) and for 1040 Schedule D (box g). If the new basis is higher than the reported basis, the adjustment should be entered as a negative value (since it is reducing the gain) but right now it is being entered as a positive value so it's actually being added to the gain.
Example:Let's say on your 1099-B you have an entry for a sale with proceeds of $10,000, and a reported basis of $5,000. Unadjusted this would mean a $5,000 gain. Now let's say that the given basis is actually incorrect (there could be many reasons for this, for example income could be reported elsewhere, or there could be a basis adjustment for a previous wash sale) and the actual basis is $7,500.
The software should take the new basis, add an adjustment of -$2,500 to column g in the worksheet row and this should also reduce the value in column g on 1040 Schedule D by -$2500 resulting in a reported gain of $2,500. However, what the software is currently doing is adding an adjustment of $2,500 to column g which increases the reported gain. So instead of the correct reported gain of $2500, it will show a reported gain of $7500.
TL;DR; FreeTaxUSA right now has a bug that means upward basis adjustments are added to your taxable income instead of subtracted.
Edit: I noticed it because my taxable income was way higher than I expected, and when I went in to look at the generated 1040 Schedule D Form I noticed the bug.
Edit2: I am not a lawyer, and this post doesn't constitute legal, financial, or tax advice. Talk with your own tax attorney or another professional before making any decisions.
Edit3: Here is a photo showing what an incorrect Form 8949 looks like and here is what it should look like.
Edit 4: I'm heading to bed for now. I'll keep this updated with any response I get from support tomorrow.
Submitted January 29, 2021 at 01:39AM by techcaleb https://ift.tt/3abMzHm
