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NY State tax starting amount off by almost 25%

How do I find out where TT gets the starting amount for 2020 NY State taxes, in the "NY tax return summary" page? For federal taxes, there is a page that doesn't give you all the details, but at least some.  For NYS, you get only starting amount, NY income factor and allocated NYS tax.

 

The problem is that the starting amount is 25% more than what I get if I plug the same "Amount taxed by New York" into a couple of other sites or through bracket-based formulas. I understand being off by 1-2%, but this is a lot more. I went backwards and I would have to have roughly 20% more income to get to the same state estimate. The federal numbers are in line with what I would expect. How can I figure what I'm doing wrong?

 

I can imagine why I don't get to see the full NYS return until I pay (and I'm not done with all 1099 forms anyway), but at least some details would help. I called support, but I'm getting upsold for a CPA. If I wanted a CPA, I would have hired one...

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4 Replies

NY State tax starting amount off by almost 25%

I figured what's wrong: the effective tax rate is exactly the same as the marginal tax rate. In other words, it's applying the marginal tax rate to the entire income, not just to its bracket. That doesn't sound right.

 

How do I report this?

DawnC
Employee Tax Expert

NY State tax starting amount off by almost 25%

You can preview the NY Tax Summary and your Federal 1040 without paying.  This may help show you something.  That is a limitation of the Online Software; with the desktop software, you have access to all of your forms at all times during preparation.  To preview the summary and 1040, see these instructions.  The state summary will be on the left panel also (the instructions don't mention this).

 

The Form IT-201 income computation begins with re-entering line items from the federal return to arrive at federal AGI. Include additions to income and deduct subtractions from income to arrive at New York AGI. To calculate taxable income, deduct New York standard or itemized deductions and dependent exemptions. The New York return includes additional taxes for City of New York and City of Yonkers.  

 

Instructions for Form IT-201  This is what TurboTax follows when calculating NYS tax for full year residents.  For other form instructions, see this chart.  

 

The tax tables that should be used are in the instructions.  The tables start on page 49 for IT-201.   In this New York State tax table, the taxable income column is the amount from Form IT-201, line 38.  What does the tax table report your tax should be and does that match what is on the summary? 

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NY State tax starting amount off by almost 25%

The joys of being in the top bracket:

 

https://www.bogleheads.org/forum/viewtopic.php?t=247046

 

It is a good problem to have and not a bug, but I still think TT could say something about this.

NY State tax starting amount off by almost 25%

Hi DawnC,

I didn't know about and hadn't noticed the warning in line 3 on worksheet 7 on page 59 of the IT-201 instructions. Basically, $50K into the top bracket, there is no marginal taxation anymore and you'll have a flat tax rate.

 

Thanks for your help with the preview, I would have never found that on my own!

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