Hi TurboTax Team,
I seem to be running into a issue on my TurboTax desktop application. I'm manually calculating my taxes and the numbers are not adding up. Due to the difficulty of debugging I've made fake data to show the problem I'm facing.
I've made a test user who makes $50k a year. For simplicity sake, he has no tax deductions other than the standard deduction of $12,200.
If I put this data into the TurboTax application. It outputs that this users Total Tax is $4,345. However when I do the math from the IRS site using the 2019 tax tables, I get $4,342.
$50,000-$12,200 = $37,800 Total Taxable Income.
My math using IRS 2019 Tables: (9,700*.10)+((37,800-9,700)*.12) = $4,342
TurboTax Total Federal Tax is showing $4,345 (+$3 difference)
The math seems to deviate further the higher the income, for example for $100,000.
$100,000-$12,200 = $87,800
My math using IRS 2019 Tables: (9,700*.10)+((39,475-9,700)*.12)+((84,200-39,475)*.22)+((87,800-84200)*.24) = $15,246.5
TurboTax Total Federal Tax is showing: $15,253 (+$6.50 difference)
This difference is causing an incorrect federal refund on the application. Sometimes its over-payment, sometimes its under-payment. Can anyone validate they are seeing this issue as well? I only saw one similar post but it did not have a follow up on if this is a defect or not.
Thanks for sharing NCperson,
So it looks like the IRS is using an income gap / buffer of $50 and splitting the difference ($25) to come up with the numbers above. (i.e for my $50k example IRS gives the individual a $50 buffer so they can make $50,000 to $50,050 of income, and are taxing the individual as if they made $50,025)
Versus my math:
For the $50k example add ($25*.12)= $3
For the $100k example add ($25*.24) = $6
Now the numbers add up. Thanks for the help!
I have to imagine these tables were originally created when everyone did their taxes with pencil and paper.
Asking the average taxpayer to do all the calculations for the tax bracket created the risk of too many errors. hence the IRS created the look up tables for incomes under $100,000.
That table has been $100,000 and under for at least the 40 years I've had to use them. 40 years ago, they probably covered over 90% of tax papers since incomes were so much smaller.
Even with the tax table, TurboTax (desktop) enters the wrong tax. Turbotax is entering 1,900 on tine 17 for income of 17, 713 (line 16). The tax table shows 1930. Can I override this error?
First, line 16 and line 17? Taxable income is on line 15 of the 1040 and the tax is on line 16.
Second, a common cause of the tax not appearing to be right is because the taxpayer has qualified dividends or capital gains (or both). In this case, the tax calculation is shown on a worksheet called "Qualified Dividends and Capital gains Tax Worksheet" (or something close to that).
The reason for this is that qualified dividends and capital gains are taxed at a lower rate than ordinary income. This means that when you look at the Tax Table for this taxable income, you don't see the same result on the tax return. There are some other situations in which tax is calculated using something other than the Tax Table, but qualified dividends and capital gains are the most common reason.
If the taxes are calculated not by the means of a table lookup then it should state how it was done, say checking a box on line 16, stating it's source (form number).
I found the error, the qualified dividends and capital gain tax worksheet 22 line states: Figure the tax on the amount on line 5 (which is 17,556). If the amount on line 5 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 5 is $100,00 or more, use the Tax Computation Worksheet. In this case, the Tax Table should be used to figure out the taxes, not the Tax Computation Worksheet. And this is why the tax figured is incorrect, Turbo tax needs another "if statement".
I am looking at line 22 on the qualified dividends and capital gains worksheet.
Line 5: 118,298
Line 22: Figure the tax on the amount on line 5. If less than $100,000 use tax table... If greater than $100,000 use Tax Computation Worksheet...
From IRS: Married Filling Separate:
a b. c. subtract
Computation from IRS: 118,298 x 0.22 = 26025.56. 8,420. = 17,605.56. (by my calculation)
However the worksheet in TT is indicating a value of 22,471. This is a significant difference in my Tax!
Line 24 has a similar issue in tax calculation
My line 1 is 119,341
Line 24: (use tax computation in same manner as line 22)
Computation from IRS: 119,341. x 0.22 = 26,255. subtract 8420. = 17,835
However the TT calculation results in: 22,721
I saw something indicating TT computation is different and resulting in much higher tax!!!
Tax on 118,298 is $14,382. + 24% of the amount above $84,200 ($8184).. This yielding: $14382 + $8184 = 22566.
What is going on, why the difference?
what tax bracket table are you using? if you are married - separate, $118,000 would put you in the 24% tax bracket and your calculations are only using 22%, so something is wrong off the get-go.
How are you figuring the amount to subtract?
24% * 118298 = $28,392 LESS
.02 * $45,200 = $904 LESS
.12 * $30250 = $3,630 LESS
.14 * 9875 = $1383 EQUALS
$22475 (and TT gets $22471, so I have rounding errors somewhere - close enough)
the bolded numbers sum to $5917- how did you get $8460?
also, what year are you looking at? you mention the marginal rate of $84,200 but that is from the 2019 tax brackets, which will be another source of variation.
Yes, mine was calculated incorrectly. With $53675 taxable income, married filing jointly, my federal tax should be $6046 according to the tax table and the computation method. Turbo tax has it at $6010. No capital gains or losses.
@trclark44 Not sure where you are seeing $6,010. TurboTax is calculating tax of $6,046 on taxable income of $53,675.
On line 22 of the capital gain worksheet, the tax is supposed to be calculated based on the income shown on line 5. However, it's calculating the tax based off the income on line 1 (which is also the same on 1040 line 15). This is an error, and as a result, causing an overpayment of tax.
Please see my note below. When using qualified dividend worksheet instead of form 1040 income to calculate the tax, it is supposed to be using line 5 of the qualified dividend and capital gain worksheet as the base. Instead it is using line 1 of that worksheet to calculate the tax (which is also the same as 1040 line 15). It's calculating incorrectly, and needs to be fixed. It is causing an overpayment of tax.
The tax calculation on the 2021 tax return is incorrect. When using qualified dividend and capital gain worksheet instead of form 1040 to calculate the tax, the tax calculation is supposed to be using line 5 of the qualified dividend and capital gain worksheet as the base. Instead it is using line 1 of that worksheet to calculate the tax (which is also the same as 1040 line 15). It's calculating incorrectly, and needs to be fixed. It is causing an overpayment of tax.
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.
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.
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:
If you are using a CD/downloaded version of TurboTax, use these steps:
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.
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?
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.
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!
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:
You can simply play around Sch D with different numbers to alter line 13 amount to check your different results against manual calculations.