Less Income in 2021 But Paying Tons More in Fed Taxes

[klh-4]

How can we make $12K less in 2021 than 2020 and owe almost $5K in federal taxes?  Something is wrong with the taxable income calculations.  I've reviewed the comparison and something looks wrong.  Is there an accountant that can review these taxes before submitting Federal.

[xmasbaby0]

If you upgrade to TurboTax Live you can get a review by a tax expert.

https://ttlc.intuit.com/community/choosing-a-product/help/what-is-turbotax-live/00/27191

No one in this user forum can see your tax return or your screen.  There were major tax law changes that began with the 2018 tax year that seem to continue to surprise some people.  Personal exemptions of over $4000 per person were removed beginning with 2018 returns.

 Was something different for 2021?  Did you have less income due to the pandemic?  Did you receive unemployment compensation?  If so, did you have tax withheld from it?

There are a lot of variables that affect your refund or tax due including how much you earned, how much tax you had withheld, your filing status, the number of dependents you claim, your deductions and credits, etc.  You may have lost Earned Income Credit or the Child Tax Credit— did a child turn 18?  If you received the EIC last year, remember that changes in the amount you earn have a big effect on the amount of EIC you can get. (Sometimes earning more money means less EIC)  Are you 65 or older ?  If so, your standard deduction is higher. Everyone has a higher standard deduction now so it is harder to use itemized deductions.

And of course, always check your own data entries, looking for errors such as misplaced decimals or extra zeros.

https://ttlc.intuit.com/questions/1901008-why-did-my-refund-go-down-compared-to-last-year-s

Print out 2020  and 2021 and compare them side by side to see what is different. 

https://www.postbulletin.com/news/business/tax-preparers-warn-your-refund-may-be-smaller-than-usual/...

https://turbotax.intuit.com/tax-tips/tax-payments/video-why-would-i-owe-federal-taxes/L3VXudPiN

[klh-4]

The biggest change I noticed by comparing the 2020 and 2021 is that although we earned $12K in total income, the taxable income increased by $30K.  Also I have TurboTax Deluxe and I don't see an option to upgrade to TurboTax Live.  

[xmasbaby0]

@klh-4 We cannot see what software you are using.   If you have the CD/download you cannot use TurboTax Live; "Live" is a feature of only online software.   

If you cannot use "Live"---sorry but a review by a CPA is not available to you.   Print out the two years of returns and compare them side by side---line by line-- to see what is different.

[klh-4]

I paid for Deluxe and should be able to get this reviewed.  I guess I need to use HR & Block next year.

[xmasbaby0]

To call TurboTax customer support

https://ttlc.intuit.com/questions/1899263-what-is-the-turbotax-phone-number

Customer support is available from 5 a.m. to 9 p.m. Pacific time daily

[bosso3]

I suggest you compare your entire 2020 tax return side-by-side with your 2021 tax return.

If needed, print out a copy of each and put them side-by-side.

Compare each number for each line item for 2020 to the corresponding line item for 2021.

Do this for the entire return.

This should show you which numbers cause the difference.

There are many reasons that can affect the taxes you pay.  I will list only a few: 

-  Your filing status is different (married vs single)

-   Fewer dependents

-  Non-taxable income reported in 2020.

-  You moved up into a higher tax bracket.

-  More of your social security payments are taxable because of a higher income from other sources.

-  Withdrawal from a IRA or 401k . . . . .

-  You had income in 2020 that is taxed at a different rate, than your 2021 income (eg: Capital Gains)

-  You may have made an error on your 2020 taxes . . . . .

As I see it now, only you can see what you entered and do this comparison.

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