Question

Total Tax Calculating Incorrectly (Federal) Causes Incorrect Refund Amount.

Forum|Forum|6 years ago
March 1, 2020
3 replies
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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.

N

NCPERSON1

under $100,000, ,you need to be using the tax tables

https://www.irs.gov/pub/irs-pdf/i1040tt.pdf

M

MM_SystemsAuthor

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!

N

NCPERSON1

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.

C

Chris1112

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?

N

NCPERSON1

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.

T

tax638

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.

T

trclark44

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.