Super simple ?discrepancy?.

[mbdowty]

I was attempting to understand some calculations and decided to input only two items into a fresh Turbotax2023 tax return.  I input 40k of interest and 10k of LT Capital gains.  

Standard Deduction and Married filing jointly (no dependents). 

By my calculation, that should result in $22300 taxable ($12300 regular income should be taxed at 10% rate resulting in $1230 federal tax due).  However TTAx is indicating $1233 federal tax due.  I don't understand where the $3 discrepancy could be in such a simple return.  The summary table concurs with my $22300 taxable - fyi.  It's well below a Capital Gains 0% threshold of course.

What am I missing?

[VolvoGirl]

Is that the tax on 1040 line 16?  Or the tax due on line 37?  It may be a penalty on line 38.  

[Bsch4477]

The 10%  bracket tops out at $22,000. 

[mbdowty]

Both.  There is no penalty do both lines are identical at $1233

[VolvoGirl · Accepted solution]

See the IRS worksheet on 1040 page 36 for how the tax is figured.  Turbo Tax uses the same worksheet.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Even though it shows up as income on the first page,if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet.  It does not get filed with your return.

In the online version you need to save your return as a pdf file and include all worksheets to see it.

[mbdowty]

I'm not sure what I'm misunderstanding.  The taxable income is $22300.  This is made up of $12300 ordinary ($40000 - $17700) and $10000 LT Cap Gains.  You enter the ordinary tax table with $12300 which is all within the 10% bracket i.e. $1230 tax.  The LT Cap Gains doesn't come into play because the taxable income of $22300 is within the 0% LT tax bracket.

[mbdowty]

Thank you.  This was the answer.  TTax in this case doesn't use the math to calculate the tax but relies on the simplified tax table.  In this case (hypothetical), TTax would have made me pay $3 more than the IRS would require.  This is disappointing to find out, but since it is hypothetical, I don't really care.  Strange that they don't do the rather simple math to come up with a better answer for the filer.

[rjs]

---

@mbdowty wrote:

TTax in this case doesn't use the math to calculate the tax but relies on the simplified tax table.  In this case (hypothetical), TTax would have made me pay $3 more than the IRS would require.

---

@mbdowty 

For taxable income below $100,000 you are required to use the Tax Table to calculate the tax. TurboTax is not making you pay "$3 more than the IRS would require." It is making you pay exactly what the IRS requires. Note that line 22 of the Qualified Dividends and Capital Gain Tax Worksheet (where the tax is calculated) says "If the amount on line 5 is less than $100,000, use the Tax Table to figure the tax."

[EDIT: Incorrect paragraph removed.]

@mbdowty wrote:

Strange that they don't do the rather simple math to come up with a better answer for the filer.

---

You are not allowed to use "simple math." Using the Tax Table is required.

[mbdowty]

Understood re the tax table vs calculation.  

Re "ignoring the previous post", I didn't.  I answered with another question.  I think the replies came in out-of-order and there was a different misunderstanding of the question.  

In any regard, the questions is answered, thank you.

The small discrepancy was my error in not using the table.  I'd never had an actual income below $100k so I'd never come across that detail.

[rjs]

---

@mbdowty wrote:

Re "ignoring the previous post", I didn't.  I answered with another question.  I think the replies came in out-of-order and there was a different misunderstanding of the question.  

---

What I wrote about "ignoring the previous post" was wrong. I have deleted that whole paragraph from my reply above in the forum. You saw it in the email that was automatically sent to you when I first posted.