Bug in New Mexico tax calculation

[zeblon]

TurboTax is calculating the wrong tax due for my New Mexico PIT return. My New Mexico Taxable Income (line 17 of NM PIT-1) is 92,982. This is correct in TurboTax. However, the tax on that amount (line 18) is wrong in TurboTax. TurboTax says it is 4,147, but it is actually 4,148. Not off by much, but it is off. 

I discovered this because I filed my NM return on the state website instead of e-filing through TurboTax. The state website calculated a different tax due than TurboTax did. I checked against the rate table, which says the tax due for married filing jointly should be "$768 plus 4.9% of excess over $24,000". Sure enough, the state is right and TurboTax is wrong: 768 + .049 * (92982 - 24000) = 4148.12 ≈ 4148, not 4147.

If there's a better way to report a bug let me know.

[BillM223]

I do not know if this is the case specifically for New Mexico, but for other states with similar tax tables and tax rates, the tax calculated by TurboTax has been one dollar off. I asked why, and the response was that instead of entering and using the massive tax table in the state's instructions booklets, TurboTax just uses an algorithm to calculate the tx due, with the result that the tax due is often one dollar off. In the state I was asking about (on the East Coast), the state did not mind. I wonder if the same is true with New Mexico. 

If the state writes you a letter and asks for interest on the error, then please file a claim under the 100% TurboTax Accurate Guarantee.

[zeblon]

Thanks for the reply. In this case the "rate table" isn't a big honking table, it's a set of equations like the one I showed in my post. It seems they have the equations implemented slightly off from what the state defines.

[BillM223]

Are you using the tax rate tables or PIT-B, or even Schedule CC?

[zeblon]

I'm using the rate table, through the state's online PIT-1 (Taxpayer Access Point - State of New Mexico). I selected "Rate Table" on Line 18a of the state's online form, which resulted in the form automatically calculating the tax on line 22. The current tax rates are documented (in equation form, not as tables) on the last page of https://www.tax.newmexico.gov/individuals/wp-content/uploads/sites/5/2021/12/PIT-rates_2005_2021.pdf. The state's calculation is consistent with their documented rates.

[BillM223 · Accepted solution]

Despite what I said earlier about using an algorithm rather than the tax tables, in this case, TurboTax agrees with the NM Tax Rate Tables. Please see the NM 2021 Tax Rate Table.

As you will see, the table shows 4,147 for a taxable income of $92,982, not the 4,148 that the equations show. I have to assume that either amount is acceptable to the state.

[zeblon]

Interesting! Mystery solved!

[gbacchin]

@BillM223

This is very interesting. The New Mexico tax rates have been the same for quite a long time (only added recently the 5.9% over $315k which is only some wording added at the end) and to date nobody at NM Taxation & Revenue has spotted the calculation error in the table. Indeed, for MFJ, the tax rate are off by $1 already in the first $1,000 and off by $2 as soon as the income reaches $9,000.

Their own software and many online providers use the equation, not the table. TurboTax uses the tax rate table, which is legally correct. Hence, all New Mexico TurboTax taxpayers with an income above $9,000 are saving $2 in taxes (or only $1 in case of favorable rounding). What is it, a good $1M/year lost for the State of New Mexico or 100 students attending UNM for free?

No idea who to contact, but New Mexico should correct the tax rate table error. I think that I will use the TAP service to file through them and pay the extra $2.