Married couple with taxable income of $24,500 but liability over $5k???

[Bunching]

Hi all,

I did our taxes last night (married couple, no dependents, filing jointly) and I think there was some sort of mistake. TurboTax suggests our tax liability is twice as high as a simple calculator -- what does it know that I don't?

Here's our setup:

• AGI of $50,400 (comprising $18,400 regular W2 income and $32,000 from backdated Covid-Related Withdrawal, i.e. we cashed out $96,000 during COVID and spread repayments out in thirds so $32k is taxable this year).
• Standard Deduction reduces taxable income by $25,900
• Taxable Income of $24,500 (TurboTax confirms this)
• Total tax of $5,400 (???) (TurboTax says this)

A popular web calculator for Nerds who like Wallets suggests our total tax owed should be about $2,500 not $5,400. So did I screw this up? Can anyone see something that I'm missing?

I don't have that much money in my account so I will be a late filer. We are quite worried, and hoping someone can point us in the right direction. Any help would be much appreciated.

Kind regards,

Shawn

[SteamTrain]

Yep, that's fishy.   EXCEPT

IF the $18,400 was Self-employed income...then that ~$5400 number is right on target, since you would owe SS and Medicare taxes of ~15.3% on that...before any regular income taxes were applied.

Are you sure you entered that income as W-2? 

IF it was SE income, and entered as such, then the ~$5400 is at least close to being correct.

Print out a copy of your form 1040, and look to see which lines the income is showing for...and where each tax charge gets added in.

[Vanessa A]

Did you mark the Covid withdrawal as a covid withdrawal?  If not, you would have a 10% penalty on the $32,000 which would be calculated separately.  Look at your Schedule 2 line 8.  Is there a number there?  If so, go back through your 1099-R section and make sure you tell TurboTax that it is a covid withdrawal so you get the penalty exemption.

Also, the amount due should not make you a late filer.  You could file an extension and request a payment plan.  Otherwise, you will be subject to failure to file penalties as well as late payment penalties and interest.