I believe that Turbotax is not subtracting the subtraction amount listed on the IRS instructions for the 2020 1040 Line 16 (Tax). Has anyone experienced this?

[Ally2020]

I tried speaking with customer service but they cannot look into this without me paying the fee for live tax assistance, which I don't feel I should need to because I'm confident it's an error within Turbotax. I compared their calculations to the actual IRS forms after I was shocked by what I allegedly owe for 2020. I want to stick with Turbotax because I like having everything in one place but I'm stuck on what to do here!

[MaryK4]

TurboTax uses the appropriate method for computing the tax from one of the following: the Tax Table, the Tax Computation Worksheet (in the government instructions), Schedule D Tax Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet, Schedule J, Form 8615 (Tax for Certain Children With Unearned Income of More Than $2,200), or the Foreign Earned Income Tax.

TurboTax will use the best tax based on the entries you made.

[Ally2020]

Hi @MaryK4, Thanks for your response. I guess I should be more specific!

Here are the parts that Turbo and I agree on:

-Taxable income: approx. $126k

-Deductions: approx. $24k

-Credits: $4200

-Taxes withheld: approx. $11k

-Status: married filing jointly

Per Turbo, I still owe approx. $7k. Because I was surprised by this, I looked at the 1040 for 2020 and followed the directions to calculate my taxes on my own. Per the 1040 and the Tax Computation Worksheet, my taxes would be as follows (numbers are rounded):

-$126,000 (income) - $24,000 (deduction) = $102,000 (taxable income) x 0.22 (multiplication amount) = $22,440 - $8420 (subtraction amount) = $14,020

-If you subtract what I already paid ($11k), and my credits ($4k), it's close to an even break (this is what I expected based on my 2019 taxes, which should be almost the same)

-The number that Turbo says I owe appears to be off by the subtraction amount from the Tax Computation Worksheet. If you did not subtract this, you pretty much get exactly what Turbo says I owe:

-$126,000 (income) - $24,000 (deduction) = $102,000 (taxable income) x 0.22 (multiplication amount) = $22,440 - $11,000 (already withheld) = 11,440 - $4200 (credits) = $7240 still owed

I don't know how to reconcile this, other than to think that Turbo has made an error and not deleted the subtraction amount! I appreciate anyone who is able to make sense of this! I haven't paid to talk with a Turbotax advisor because it really seems like this is an error, and I don't think I should have to pay to point out a coding error! Maybe I'm totally missing something, but I have poured over this and had others check as well! 

[MaryK4]

Thanks for the clarification- For your subtraction amount, do you have the Child Tax Credit (Line 19) and/or the Schedule 3 (Line 20)?  I am trying to pinpoint the entries.  Thanks!

@Ally2020

[Ally2020]

Hi @MaryK4, Thanks for responding again and looking at this! The subtraction amount I referenced of $8420 is directly from the Tax Computation Worksheet, but yes I also have credits on lines 19 and 20 (of about about $4k combined). 

[Ally2020]

Hi @MaryK4, I was wondering if you were able to look at this and see if Turbotax's calculation makes any sense to you. I used the TurboCaster app and a similar program by HR Block to do a rough calculation of what I should owe, and I come up with the same numbers I get from completing the 1040 myself (in other words, ~$8,000 less than what Turbotax says I owe!). 

[DawnC]

Is your total income 126K or your taxable income 126k?   Your taxable income is on Line 15 and already has your standard deduction removed.   Use the amount on line 15 to determine your tax.   

This tax table is for ordinary income only.  Some income is taxed at different rates (Qualified Dividends/Long-Term Capital Gains are taxed at a lower rate than ordinary income).  If you have any of the following included in your return, the tax table will not give you accurate results:  

• Qualified Dividends and Capital Gain Tax Worksheet
• Schedule D Tax Worksheet
• Schedule J
• Form 8615
• Foreign Earned Income Tax Worksheet

And, TurboTax comes with an accuracy guarantee, see more - Your taxes done right, guaranteed

[Ally2020]

Hi @DawnC , yes, I'm using the amount from line 15 and the tax computation worksheet from the tax table (income is above the tax table portion), and the difference between what I calculate and what Turbotax calculates is exactly the subtraction amount on the tax computation worksheet. It seems that Turbotax is not subtracting the subtraction amount. 

My concern was that I should not have to pay to talk to a tax expert to point out Turbo's mistake, but I read that Turbo's fees are refunded if you get a larger refund through a different tax preparation method. So would it be safe to say that if I'm right, I wouldn't have to pay? 

Thanks!

[dmertz]

On Form 1040:

Do you see any amount of APTC repayment or AMT on line 17?

Do you see $4,200 on line 21?

Do you see any amount of Other taxes on line 23?

Do you see $11,000 on line 25d?

[Ally2020]

Hi @dmertz, 

I can't see how Turbotax is filling it out since I haven't filed yet, but when I fill it out, we have nothing that goes on lines 17 or 23, and yes we have $4200 on line 21 and $11,000 on line 25d. 

[dmertz]

You can view Form 1040 and Schedules 1 through 3 before paying by clicking Tax Tools -> Tools -> View Tax Summary -> Preview my 1040.

[Ally2020]

Thank you @dmertz this is incredibly helpful! I now see that Turbotax has ~$8k under "uncollected employee social security and medicare or RRTA tax on tips." Any ideas on how this is calculated?? Our employers withhold our taxes and we've never owed this before! 

[VolvoGirl]

You never said what the tax is on line 16.  I put in basic info and 126,000 as interest in come to get to a taxable amount of 101,200 and the tax calculated is right at 13,844.  So it subtracted the 8,420 off.   So we need to know all the other line amounts.

[Ally2020]

@dmertz I was able to trace backwards and fix a data entry error...thank you so much! The thing that threw me off was that the number was almost identical to the "subtraction amount." Your tip was super helpful!

[Ally2020]

@VolvoGirl thanks for looking at this...I was able to find the error after learning how to view the actual documents on Turbotax before filing!