Why does turbo tax show my federal tax rate as 168%?

[Krd611]

After taking the standard deduction, my taxable income is only $25, so I should be in the 10% bracket. Why is turbotax showing my rate at 168%. Obviously this a glitch in TurboTax program, but no way to get in touch with them directly to make them aware. 

[torchill]

More likely that you filled out something incorrectly, as i doubt your taxes would be that complex if you do only have an income of $25 after deductions.  

[Krd611]

Entering in something wrong would be the simple answer. However this tax return is so basic, there is nothing wrong to enter. Income is $6839 and not taking any itemized deductions. I am using the standardized deduction of $6814. Leaving my taxable income of $25. I should fall in the 10% bracket and only owe $2.50. Turbo tax is stating I owe $42 on the $25 taxable income. Just putting this out there to get some attention to see if anyone else notices an error on their tax rate. The maximum tax rate that can be applied to someone's income is 37% according to the federal tax rate table, so this has to be an error with Turbo Tax. No way I owe 168%, even if I did make an error.

[ColeenD3]

Here is a possibility offered by dmertz in a similar question:

Do you mean that you yourself are calculating a marginal tax rate of 54% on a certain amount of self-employment income?  While not common, a 54% marginal tax rate on the addition of some amount of self-employment income is entirely possible due to side effects of the increase in your AGI from the self-employment income even though your ordinary income falls in the 10% tax bracket.  Compare the details of your tax return with and without the additional income to see what is contributing to the change in tax.

[Critter]

Income is $6839 and not taking any itemized deductions. I am using the standardized deduction of $6814. Leaving my taxable income of $25.

If your standard deduction is $6814 and not $12,000 then you must be a dependent under the age of 25 with income not from wages  OR  you are filing married but separate.  

What is your age and filing status ?  What is the nature of your $6839 income ?  Cap gains ? Div ?

Did you review the entire return yet ?   Do you see a form 8615? 

[SteamTrain]

@Krd611 

You need to look at your actual form 1040 to see what is going on....I know that "Effective" tax rate number can be all over the place, and may not be representing reality.  And there may be nothing wrong, just uncertainty as to what numbers the program is using to get that "Effective" number

____________________

As an example, (for a Single person under age 59.5, no dependents)  I have entered a W-2 with $3000 income, and a $10,000 distribution 1099-R from an IRA. 

.......$800 taxable income, and a  $1081 tax since there is $1000 penalty on the IRA distribution...and on my summary page it shows a negative 0.88% effective tax rate.   All the numbers on the form 1040 are correct, but the way the "effective" tax rate is calculated is somewhat inscrutable at times.

Thus your "tax" of $40, may include some other things besides the simple tax on your income...and we can't know what else that is somewhat unusual, or may be subject to penalties, or the SE tax that you might have entered.   For simple ordinary W-2 income, the effective rate is usually pretty close.....start entering other forms of income, and EIC, or Child Credits, and who knows what the "Effective" rate will show.  

[Krd611]

Single, under the age of 25, but parents can claim me since I'm a student. Income from wages $6464, but I'm trying to also enter $375 earnings listed on my 1099-Q. The data I am entering from this form has got to be what is causing what I owe to be different than what I expect.  

[Critter]

Yep ... that is it.  Review the entire return and the worksheets to see how the tax is calculated.  If you took out from the 529 plan and did not use it for educational purposes then you are hit with tax and a penalty. 

[Critter]

$375 x 10% = $38 penalty + 4 tax. 

[Krd611]

Thank you for explaining this. There is an option to see the worksheets in Turbotax?

[Critter]

You can view the Form 1040 for free at any time during preparation prior to paying and filing:

• Open your return, and in the left menu column, choose TAX TOOLS, then choose 
• In the Tools window, choose View Tax Summary.
• When the Tax Summary opens, look in the left menu column and choose Preview My 1040.

Or you can pay in advance to view/print the Form 1040 and all forms and worksheets prior to filing.  Here's how:

• Open your return, and in the left menu column, choose Tax Tools, then Print Center.
• Then choose "Print/save/preview  this year's" 
• On the next screen choose to "Pay now".
• The next screen should be an Order Summary.  Review that, and if all is OK, click 
• It should then prompt you for payment by credit or debit card.  The screen only says "credit card", but it will take a debit card.

NOTE:  If it should offer you the option to "pay later" out of the Federal refund, that can't be used for this purpose.  You will need to pay now by credit/debit card in order to download/print prior to filing.