Significant Tax Due Increase

[rayfrench]

I've been using Turbo Tax Premier for years and I'm currently in the 22% tax bracket as I was in 2020 as well.  My Taxable Income increased 27% this year over last year, but the Federal Tax I Owe jumped 64%.  This does not seem right at all.  Does anyone have any thoughts as what is happening here?

[xmasbaby0]

We cannot see your screen, your return or your account.  Have you entered ALL of your 2021 information?  All your income, etc.?  Many tax documents that you need do not arrive until late January or even February, so maybe you do not have it all there yet.

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

[KrisD15 · Accepted solution]

There could be so many reasons. 

Besides your income and the tax on that income, are you loosing any credits, such as Child Tax Credits? 

Was the increase all earned income or did you have Capital Gains or take any early distributions? 

You can look over your 1040 and compare it to last years to see where the numbers are different. 

Look at line 15 (income) and 16 (tax) 

Look at line 24 total tax and then look for the adjustments that were made after. Did you loose any credits? 

[VolvoGirl]

Usually more income = more tax = less refund.  Your withholding didn't increase enough to cover the tax due.  Or some credits you got are reduced because you made more income.  And any  dependents you have are a year older.  If you made more income that can reduce some credits you got like the EIC.  

Here's a good FAQ on why your refund might be less than last year

https://ttlc.intuit.com/community/refunds/help/why-did-my-refund-go-down-compared-to-last-year-s/00/...

[Mike9241]

it's certainly possible because of marginal tax brackets

an example  2020 taxable in MFJ $81K  tax about $9K effective rate is only about 11%

add  27% more income - about $22K tax jumps by $4.8K  (22% bracket) about a 52% increase.  then there is the effect that more income has on other items on your return.

a recommendation is to print out the 2020 return and as best as possible compare it to 2021.

[rayfrench]

Thanks!  TT doesn't give you a breakdown of prior year to current year detail changes, just top level.  When I created a pdf on the current year return and compared it to last year, the largest contributing change to tax due was a big increase in 

self-employment tax.