you do owe 12.4% on the 1099 and TT will adjust for that.... are you saying that TT is also adding 12.4% for your wife's W-2? it's not clear what you are stating.
does it "look like" or is it? what was the change in the federal tax refund / amount owed divided by her Box 1 on her W-2 before and after you entered the W-2. The result should be your marginal tax bracket.
