Federal Tax Calculation Help!

[PJackson]

This is the first year my wife (self-employed) and I (W2) are married filing jointly. I’ve been able to manually calculate her Self-Employment Tax to match what the program calculated, however I have been unable to do the same for our Federal Tax owed. Based on the information below, hoping to get some help in figuring out where I may have gone wrong?  

Of course, please let me know if any additional information is required!

INCOME

• W2 wages = $108,301
• Self-Employment Income = $99,435
• Dividends = $2,246
• Capital Gains = $35
• Interest (none is tax exempt) = $14,733

Her Self-Employed Net Income (Total Income – Expenses incl. IRA Contributions) = $80,364

TOTAL FED INCOME	$205,679
STANDARD DEDUCTION	$29,200
QBI (qualified business income) DEDUCTION	$14,751
Half of Self-Employ taxes DEDUCTION	$6,610
TAXABLE INCOME	$155,118.36
DIVIDEND INCOME	$2,246.00
TAXABLE INCOME - DIVIDEND INCOME	$152,872.36

TAXES

• Dividend Tax (calculated) = $337
• Total Federal Tax (calculated) = $28,939
• Total Federal Tax (from software)= $24,039

[rjs]

You didn't say, but you probably have qualified dividends or long-term capital gain or both. Those are taxed at lower rates.

You also didn't say how you calculated the tax, or which line of Form 1040 you are referring to as "total federal tax." There are seven different methods that can be used to calculate the tax on Form 1040 line 16, depending on what types of income you have and other things in your tax return. The IRS instructions for Form 1040 line 16 explain the conditions for determining which of the 7 methods to use, starting in the right column on page 33 of the 2024 Instructions for Form 1040.

In TurboTax there is a Tax Smart Worksheet that has 7 checkboxes that show you which method TurboTax used. It's between lines 15 and 16 in the first section of the Form 1040 or Form 1040-SR Worksheet. If you do have qualified dividends or long-term capital gain TurboTax is probably using the Qualified Dividends and Capital Gain Tax Worksheet, or possibly the Schedule D Tax Worksheet.

Self-employment tax is not included in Form 1040 line 16. That gets added in later, on line 23, which comes from Schedule 2.

[PJackson]

Thanks rjs!

The $2,246 I mentioned for dividends is all 'qualified' dividends (and calculated at the 15% rate given our income). The only capital gains was the $35 I mentioned, which would be a long-term gain.

Given our various income (found in my first message), I calculated our total Federal Taxable Income in the table below...

TOTAL FEDERAL INCOME	$205,679
STANDARD DEDUCTION	-$29,200
QBI (qualified business income) DEDUCTION	-$14,751
Half of Self-Employ taxes DEDUCTION	-$6,610
Dividend INCOME + LTerm Capital Gains INCOME	-$2,281
TOTAL Fed. Taxable INCOME for Marg Tax Brackets	=$152,836

Then taking that number and calculating our tax using the marginal tax brackets + separately calculated tax from Dividends and LTerm Capital Gains...

2024 Federal Taxes --- Married filing jointly
Tax rate	on taxable income from . . .	up to . . .	Amt of Income taxed in this bracket	Tax assessed
10%	$0	$11,000	$11,000	$1,100
12%	$11,001	$44,725	$33,725	$4,047
22%	$44,726	$152,837	$108,112	$23,785
			$152,837	$28,932

2024 Dividend Taxes
Tax rate	Amt of CS Income taxed in this bracket	Tax assessed
15%	$2,246	$337

2024 L-term Capital Gains Taxes
Tax rate	Amt of CS Income taxed in this bracket	Tax assessed
15%	$35	$5

TOTAL FED. TAX (CALCULATED) = $29,274
TOTAL FED. TAX (SOFTWARE) = $24,039

(Self-Employment Tax calculated separately and not needed here)

As you can see, our dividends and capital gains don't amount to very much. And so, I'm just trying to track down where in the calculation I may have went astray (or if there's something I'm not considering).

[VolvoGirl]

No you don’t figure it that way by just subtracting the Div & Cap gains.

Even though it shows up as income on the first page,if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet.  It does not get filed with your return.

In the online version you need to save your return as a pdf file and include all worksheets to see it.

For the Desktop version you can switch to Forms Mode and open the worksheet to see it.  Click Forms in the upper right (upper left for Mac) and look through the list and open the Qualified Dividends and Capital Gain Tax Worksheet.  And you will need to use this IRS worksheet on page 15.

https://www.irs.gov/pub/irs-pdf/i1040tt.pdf

If you are using the CD/Download software, go to forms mode and open the Form 1040 or Form 1040-SR Worksheet. Between lines 15 and 16 there is a Tax Smart Worksheet with 7 checkboxes. The box that is checked shows you which of the 7 possible methods was used to calculate your tax. Then you can look for the appropriate worksheet for that method. But if the Tax Table or Tax Computation Worksheet was used, there is no worksheet. Those are simple standardized methods that do not require a worksheet.

You can probably tell because the tax on 1040 will be less than the Tax Table

https://ttlc.intuit.com/community/forms/help/form-1040-line-11-amount-is-less-than-standard-irs-tax-...

[rjs]

@PJackson  

The Qualified Dividends and Capital Gain Tax Worksheet is on page 36 of the IRS Instructions for Form 1040. You can work through it yourself on paper and see how the tax is calculated. Maybe that will make it clear what's going on.