Dear Corrlich44:
Your example perfectly illustrates how the IRS determines your effective rate. I also agree that the only meaningful "real" effective rate is obtained by dividing the total tax by taxable income.
Unfortunately, that is not how TurboTax calculates what it calls "Effective Tax Rate". They are using an indeterminate and unexplained formula that results in an "Effective Rate" that is significantly lower than that obtained by dividing the Total Tax by Taxable Income.
I haven't tried creating a "dummy" return using simple figures like yours, but for a group of real returns, with multiple sources of income, for 5 years (using Tax History Report), TurboTax's Effective Rate ranged from approx. 5% to 20% lower than the real rate. This forum does not support attachments, or I would have included the Tax History Report with the names redacted,
I've tried searching "effective tax rate" and "how does TurboTax compute effective tax rate" in the help center (under Help in program) with no results.
