Added Interest Income and 23% was taken out for additional taxes in error.

[DeeAnn]

Working on my mother's taxes. All was completed, but added interest income last and 23% of the interest income amount was added to fed taxes. She is in a 10% incomes tax bracket. This sounds like an error to me.

Dee Ann

[baldietax · Accepted solution]

adding the additional income may be affecting some other things on the return so you need to look at what is changing on the 1040 line by line to result in the higher amount due than expected; deductions or credits may phase out giving the impression of higher tax on the income that was added, or triggering underpayment penalty (if you are on desktop looking at the Fed due ticker that includes any penalty).  TT tax calcs are very solid so there will be some explanation for the effective 23%.   It will be hard to solve here without more details but I would start with the 1040 and see the changes thru to taxable income on line 15 etc.

[DeeAnn]

I reviewed the 1040 and you were right! Not only did the interest income get added to income, the taxable amount of her social security was raised by $548 and also added to her income. Why is that? WOW!! Makes it seem like it doesn't pay to try to save and earn interest on a savings account.

[baldietax]

ok glad you found the issue, not familiar with social security taxation but seems the additional interest caused it to cross a threshold for taxation:

https://www.hrblock.com/tax-center/income/retirement-income/how-much-social-security-is-taxable/