Total Tax Calculating Incorrectly (Federal) Causes Incorrect Refund Amount.

[AnnetteB6]

The Qualified Dividend and Capital Gains Worksheet will calculate the income tax on both the line 5 amount and the line 1 amount.  

The separately applied capital gains tax rate for the portion of income due to the capital gains or qualified dividends is added to the income tax calculated for line 5 (all income minus the capital gains/qualified dividends).  Then this total income tax is compared to the income tax calculated for line 1 (total income). 

The smaller of the two tax calculations is then transferred to Form 1040.

Specifically, the tax amount on line 23 of the worksheet represents the income tax for the line 5 amount plus the capital gains tax for the income eligible for the lower tax rate.  The tax amount on line 24 of the worksheet represents the income tax for the line 1 amount.  Either line 23 or line 24, whichever is lower, is transferred to Form 1040.

@tax638

[tax638]

I printed out the IRS 2021 Tax Computation Worksheet and using line 5 from the TT version of Qual Div/Cap Gn sheet, in Section B (Married Joint) column (a) I multiply by (b) to get (c) and Subtract (d) and the number I get is lower than either line 23 or line 24 in the TT version of Qual Div/Cap Gn sheet . The net effect of this is inflation of tax owed to the federal gov by $472. 

[AnnetteB6]

If you would be willing to share a diagnostic copy of your tax file, it could be helpful to examine the situation in more detail.  The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms.

To do so, follow the instructions below and post the token number along with which version of TurboTax you are using (Online or CD/downloaded and which edition) in a follow-up thread.

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

@tax638

[tax638]

921813

[AnnetteB6]

After taking a closer look at your return, the number calculated from the IRS 2021 Tax Computation Worksheet for Married Filing Joint returns does yield a number lower than either line 24 or line 25.  However, that number on its own is only part of the final calculation.

The tax calculated for line 5 income of the Qualified Dividends/Capital Gains Worksheet is taking into account all income not qualified for the lower capital gains tax rate.  This amount is reported on line 22 of the worksheet. 

Then, you consider the tax calculated on the income that does qualify for the lower tax rate (reported on lines 18 and 21 as applicable).  Add lines 22, 21, and 18 and report the total on line 23 (in your case it is the sum of lines 18 and 22).  

Then, the lower of line 23 or line 24 is used on your return.  

To avoid sharing any specific information from your return, I will not give you actual numbers, but my calculation for the tax amount on line 5 of the worksheet matched the information that was calculated by TurboTax and reported on line 22.

@tax638

[Wynter2020]

How do I ask a unique question for my situation in this online Q&A space? 

I am using Turbo Tax software and I want to understand the math behind the tax amount and please don't point me to the IRS tax table because Turbo Tax is a lot lower than if I use the IRS tax table. 

Can I find the math calculation line by line in Turbo Tax?

[AnnetteB6]

Since TurboTax is calculating your tax amount a lot lower than the tax tables, your income tax is most likely being calculated on the Qualified Dividends and Capital Gains Worksheet.  When this worksheet is used to calculate income tax, your income is broken down into certain categories.  Long-term capital gains and qualified dividends are separated from other income and taxed at lower rates.

Going through that worksheet one line at a time would show how the total tax was calculated.

If you are using one of the CD/downloaded versions of TurboTax, you can find the worksheet by going to Forms Mode.  Click Forms in the upper right corner of the screen.  Then, look for Qual Div/Cap Gn in the list on the left side of the screen.

If you are using TurboTax Online, you will need to pay for your return and then print or preview the return to find the worksheet.

@Wynter2020 

[Wynter2020]

You were 100% correct.  I pulled up the Qual Div/Cap Gn worksheet and there it is.  All the crazy and I mean crazy calculations to get to the tax showing on the 1040.  I can't say that I completely understand all the gyrations behind the ultimate bottom line but there it is.  I looked and looked for this breakdown on just about every worksheet except this one prior to my post.  LOL   Thank you so much!  

[john989]

Hi @AnnetteB6 

Please take a look at this thread below where TurboTax clearly over calculated federal tax due to long term capital gain amount on line 13 of form 1040:

https://ttlc.intuit.com/community/taxes/discussion/re-why-turbotax-did-wrong-calculations-on-my-tax-...

You can simply play around Sch D with different numbers to alter line 13 amount to check your different results against manual calculations.