Incorrect Tax Table calculation

[joedcapo]

The IRS has sent a letter saying the 2023 tax obligation calculation based on my AGI was incorrect, and I owe more money, plus interest! Has anyone else had this experience in 2023?

[VolvoGirl]

So they didn't change your AGI?  What does the letter say exactly?  

I would check over your return and see if you can see anything wrong especially in the payments section.  Make sure you agree with all the amounts listed.   Like is the difference the same or close to the refund you got last year?  Maybe you put down that you applied last year's refund to this year?  Or you put down you made a payment with an extension or paid an estimated payment that you didn't make?

A common error is showing an estimated payment on 1040 schedule 3 line 8 you didn't make or payment with an extension you didn't send in.  Sometimes people start an extension form on purpose or accidentally and an amount gets entered for a tax due to send in with the extension.

Or you claimed Excess Social Security paid on Schedule 3 line 11.  That happens when you are married and enter both spouse's W2s under the same name.

Or if you got any 1099Misc forms you didn't report it as self employment income on Schedule C and pay the SE tax on it.  It  might have showed up on 1040 Schedule 1 line 8 for Other Income instead of line 3 business income.

Or the IRS changed your income.  A common thing they change is the taxable amount of any 1099R for pension, 401K or IRA distributions or conversions on 1040.  And if you get Social Security and they increase some other income it will make more of your SS taxable. 

Turbo Tax is a self prepared return.  It has no way of knowing or checking that you entered something wrong or in the wrong place or entered something twice  Or left something out.  It doesn't check against any outside sources.  The IRS has copies of all the W2s and 1099s your employer and banks/brokers, etc. sent in to match against.  Turbo Tax only checks the calculations of what you entered.   It is your responsibility to check it over before you file.

Print out your return and check the amounts.  How to get a copy after filing

https://ttlc.intuit.com/community/prior-year-return/help/how-do-i-get-a-copy-of-a-return-i-filed-thi...

[rjs]

The tax calculation is based on your taxable income, not AGI. What exactly did the IRS letter say? Did it say anything else was wrong besides the amount of tax? Changes to other things in your tax return could change the tax amount. That doesn't mean that the original tax calculation was wrong. The original calculation was correct based on the original information in the tax return.

There are seven different methods that can be used to calculate the tax on your tax return, depending on the types of income and other factors. Some of the seven methods can get very complicated. Since we can't see your tax return, it might not be possible for anyone here in the community to check the calculation of the tax.

Did you file your tax return with TurboTax Online or with the CD/Download TurboTax software?

[rjs]

If you purchased Audit Defense for your 2023 tax return, call TaxAudit at 877-829-9695, or report your IRS letter on the TaxAudit.com web site. Do not contact the IRS until you have spoken to TaxAudit. They might contact the IRS on your behalf.

If you did not purchase Audit Defense, you can get help with your IRS letter from the TurboTax Audit Support Center.

[joedcapo]

The IRS agreed with our reported AGI, taxable Income, withheld taxes , but did NOT agree with Line 16 (TAX) on Form 1040-SR. I then manually did the math according to the IRS tax table & taxable income, i.e., so much at 10%, so much at 12%, and even a bit at 22%. My math result matched exactly what IRS' letter said should have been the Line 16 entry. In my mind, TT made a calculation error. 

[joedcapo]

• The IRS agreed with our reported AGI, taxable Income, withheld taxes , but did NOT agree with Line 16 (TAX) on Form 1040-SR. I then manually did the math according to the IRS tax table & taxable income, i.e., so much at 10%, so much at 12%, and even a bit at 22%. My math result matched exactly what IRS' letter said should have been the Line 16 entry. In my mind, TT made a calculation error. 

[rjs]

"so much at 10%, so much at 12%, and even a bit at 22%."

That's not how the IRS Tax Table works. None of the seven IRS methods for calculating the tax work that way. It sounds like you found a chart of tax brackets somewhere and did a calculation according to your own concept. If you use the IRS Tax Table, you just look up your taxable income in the table and find the corresponding tax amount in the column for your filing status. There is no math involved when you use the Tax Table.

You didn't say whether the IRS changed anything else in your tax return besides line 16. It's possible that a change somewhere else could leave the AGI and taxable income the same, but require calculating the tax using a different one of the seven methods. A change on another form could change the tax amount on line 16 without changing anything else on Form 1040-SR. The amount of withheld tax does not affect the calculation of the tax on line 16.

If the IRS did not make any other changes, I think there are two other possibilities.

1. The IRS could be wrong. It does happen. They might have overlooked something in your tax return that requires using a different method to calculate the tax.
2. You could have entered something incorrectly, or answered a question incorrectly, that caused TurboTax to use the wrong one of the seven tax calculation methods. The TurboTax calculation was correct based on your incorrect entry.

It's extremely rare for TurboTax to calculate the tax incorrectly. It would only happen if there is some very unusual combination of circumstances, or if some uncommon obscure point of tax law is involved.

I don't think we can resolve this question here in the Community. There is not nearly enough information to determine which of the seven IRS methods should have been used to calculate your tax, or to calculate the correct amount of tax. Without a lot more information, and since we can't actually look at your tax return, we cannot tell whether TurboTax is wrong or the IRS is wrong.

[VolvoGirl]

Do you have any investments?  One thing is,  you might have entered the amount in a 1099DIV in box 1b wrong.   You should be able to see how Turbo Tax calculated the tax.    There are like 7 different ways to calculate the tax.  

It depends what kind of income you have. Even though the full amount shows up in the total income on the 1040 line 7, if you have capital gains or qualified dividends the tax 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 the worksheets to see it.

For the Desktop version you can switch to Forms Mode and open the worksheet to see it. Click Forms in the upper right (upper left for Mac) and look through the list and open the Qualified Dividends and Capital Gain Tax Worksheet. And you will need to use this IRS worksheet on page 15.
https://www.irs.gov/pub/irs-pdf/i1040tt.pdf