Need help reconciling a $1 total tax difference between me and TT, if for no other reason than it is driving me crazy. Math seems straightforward. $70,181 taxable income. Married Filing Jointly. 10% bracket is $0 to $23,200, so $2,320 due. 12% bracket is $23,201 to $94,300, so remaining $46,981 ($70,181 - $23,200) is $5,637.72 due. Total tax then should be $7,958--$2,320 + $5,638 ($5,637.72 rounded). But, TT shows total tax as $7,957, $1 less. What am I missing? Does the IRS round down each tax bracket calculation versus following normal rounding rules? Is this a TT error? The numbers should be the numbers, so why the difference? Appreciate anyone who can clarify. Thank you.
What you are missing is that for taxable income under $100,000 you cannot use the bracket percentages to calculate your tax. You have to use the Tax Table. The Tax Table works in small steps. In the Tax Table, for taxable income of $70,150 to $70,199, for married filing jointly, the tax is $7,967. TurboTax is following the IRS rules for calculating the tax.
CORRECTION: The tax in the Tax Table is $7,957, not $7,967.
The information in this reply is specific to the facts given in the question, and might not apply to other situations.
Thanks, rjs. Had already looked at that, but in using the tax tables, TT is even farther off--$7,957 per the software versus your figure of $7,967. Mine was only a dollar off, and I think mine is right. I understand the argument, but I've used the bracket method for years always matching TT's figure exactly...until now. I'd love to hear from a TT tax pro on this one. Think the software is off.
Sorry, I either misread the figure in the table or made a typo in my reply. The tax from the Tax Table is $7,957. TurboTax is correct. If you always matched the TurboTax result in the past, it was just chance.
No need to apologize. When I said I considered the tax tables, I happened to have consulted Pub 17 from 2023. Ugh! The tax tables are based on the progressive tax "bracket" system, so TT is not the problem...the IRS is. As I said, the math is what the math is, and their table is a dollar short. But, what they say goes. Thanks again. I can move on now knowing there is nothing to fix.
I see now what's happening, and I have you to thank. The IRS is splitting the difference. 70,150 is 7,954. 70,200 is 7,960. 6 dollar spread. To simplify things, the IRS splits the difference. Thus, at 70,175, the middle of the range, it's 7,957--right in the middle of the difference. So, they are not strictly following the math. But, the math makes sense now.