Taxable income = $5,030, taxes owed = $3,553. This can't be right. 70% tax rate?

[cs2998]

It says my taxable income is $5,030 and my taxes are $3,553. How could I being taxed at 70% when I'm extremely poor? There is no way this can be correct. None of these numbers make any sense

[Vanessa A]

Double check your entries.  The most common reason is a decimal point in the wrong spot. Go back and look at your entries checking all decimal points.  If that doesn't work, delete your income and re-enter it. 

[cs2998 · Accepted solution]

Dang I guess I do have to pay 70% of my taxable income. I guess it's because is isn't a tax on taxable income it's a tax on non-taxable income, which is taxable, apparently. The language is weird how they use it. They taxed the total amount of my income not the "taxable income", so it ends up being really high and will be over 100% of my bank account. Oh well.

[VolvoGirl]

What is your "non-taxable" income?   What weird language don't you understand?   If you have self employment income you pay SE tax in addition to the regular income on your income.  How much is your Net Profit on schedule C after expenses?  

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare (FICA). So you get social security credit for it when you retire.

[ThomasM125]

You may have other amounts in addition to income taxes that are included in your tax due. If you look on schedule 2 of your form 1040, you will see there are many items, such as self-employment tax, penalties for premature IRA distributions and premium tax credit repayments that can be collected along with your income tax.

You can see the schedule 2 while working in the online version of TurboTax by following these steps:

1. Click on Tax Tools on the left menu bar

2. Click on Tools

3. Choose View Tax Summary

4. On the left menu bar choose Preview my 1040

5. Scroll down to find Schedule 2

[cs2998]

I thought that only taxable income was taxed, but it isn't which is the weird language that confused me. Confounding that I didn't think they would take this much money from the poor.

[Vanessa A]

Only taxable income is taxed. However, non taxable income can increase your overall income and cause some other things to be taxable or make you ineligible for certain credits. 

  Did you by any chance have health insurance through the marketplace that you entered the 1095-A for and are having to pay back some of the advanced premium tax credit?

What type of income do you have that you believe is non taxable?

Did you have an IRA distribution or 401K distribution?

If you tell us the types of income, maybe we can help figure out if you have it in the correct spots.  Sometimes entering income in the wrong location will have it incorrectly taxed. 

[dmertz]

Only taxable income is subject to income tax.  However, several other types of taxes are determined on your tax return, including self-employment tax.  Self-employment tax is calculated on net profit, not taxable income and is a tax separate from income tax.  With net profit from self-employment you could easily have an overall tax liability that includes no income tax but includes self-employment tax  (although in your case some of your tax liability seems to be attributable to income tax).  As Vanessa A mentioned, you could also have a penalty (an excise tax) on early distributions from a retirement account, but my guess is that the majority of you tax liability is coming from self-employment tax.