Calculated taxes TOO HIGH (overpayment) on simplest possible return. - BROKEN TAX TABLES

[BenH]

I'm using Home & Business 2018 and creating an extremely simple return simply to test this issue because I'm seeing the same thing with other more complicated returns and I wanted to isolate the issue.

I created a test return for a person who is 73 and married but filing separately.

I put 50,000 in as income.  She gets the standard deduction of 13,300 thus making her taxable income $36,700.

However, TurboTax is calculating the total tan on $36,700 of standard income as $4,217.

According to my calculations against the tax worksheet, the taxes should be $4214.

Additionally, the following two websites also show it as $4214:

https://www.taxact.com/tools/tax-bracket-calculator

https://www.hrblock.com/tax-calculator/#/en/te/results

But, TurboTax as well as Intuit's TaxCaster (https://turbotax.intuit.com/tax-tools/calculators/taxcaster/) continue to show $4217.

This should be the most simplest of calculations, but I can't find anything in any of the supporting worksheets.  The 1040 Worksheet states it is using the "tax table", but there is nowhere that TurboTax is "showing its work."

Why it TurboTax trying to make me overpay?

As a further example, if I have $600,000 of income the amount it calculates in tax is $186,769 instead of $182,768, a difference here of $4,000!!

It seems something is critically broken in the internal tax tables.

[NCperson · Accepted solution]

$4217 is correct; when the income is under $100,000 the tax tables are to be used. see the link below and look on page 7

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

and I think you changed your manual calcs to filing single which is where the $4000 difference is coming from.  From $300,000 to $500,000, the tax bracket is 35% if you are single but 37% if you are married - filing separately.  That 2% difference against the $200,000 difference from $300,000 to $500,000 is the $4000.  Did you inadvertently calculate 'single' when you did it by hand but use the links to calculate married -separately ? I think so.  

here is the math I have ($186,769) and got the same answer dummying a tax return in turbo tax assuming the person has $600,000 of income is over 65 years old and is filing married - separate . 

Marginal tax rate	Married filing separately
10%	$0–$9,525	9,525	10%	953
12%	$9,526–$38,700	29,175	12%	3,501
22%	$38,701–$82,500	43,800	22%	9,636
24%	$82,501–$157,500	75,000	24%	18,000
32%	$157,501–$200,000	42,500	32%	13,600
35%	$200,001–$300,000	100,000	35%	35,000
37%	$300,001 and more	286,700	37%	106,079
		586,700		186,769

I have to say, Intuit and Turbo Tax spends millions and millions of dollars to ensure its software is correct as its reputation is at risk.  They are also the experts, so 99.99 times out of 100 when these boards say 'Turbo Tax is wrong', it's likely we are wrong or simply do not understand the tax code as they do. 

hopefully, your mind is now at ease that Turbo Tax is not making you over pay - their reputation depends on it

[BenH]

@NCperson - You're right.   I think in all regards.

For the 600,000 example I scrapped my manual calc spreadsheet already, but I am going to assume you are correct as that was a hasty test increasing the numbers and I very well may have used the wrong table between my two data sets as I was switching back and forth.

I started seeing this problem as I was working on an Excel spreadsheet to manually calculate taxes using the brackets.  TBH, most of what I know about taxes is from using TurboTax for 10 years and sometimes working backwards from filling out the questions and then manually reviewing each form.  I'll admit, I was confused/ignorant about the "Tax Table."  I had assumed that the Tax Table meant simply using the bracket incomes to calculate (similar to your graph and what I was working with in Excel).  I never realized there was an actual document that provided a table to lookup tax owed like the yellow pages!  I assume this is meant to make it easier for people doing taxes by hand to find out the tax rather than computing via a "graph table" like you show.

Since the "tax tables" provide a broader range, it looks like the taxed owed is rounded up a bit (or I guess down depending on your scenario), and that accounts for the small discrepancy in amount.

I guess I should have put more trust in TurboTax here, seeing as I do let them do my taxes every year 🙂

What is surprising is that the other links I mention are doing it wrong!  TaxAct and HR block estimators.

In their defense, those are "estimators" and their actual products may compute correctly, but it appears their backend is built to use the brackets, whereas the online Intuit Taxcaster is actually properly doing a lookup against the "Tax Tables."

Thanks for teaching me something new.