calculating US tax owed
July 12, 2020 11:53 AM   Subscribe

TurboTax and the official US Tax Tables and instructions from the 1040 are giving me two different numbers from the same adjusted gross income number. What gives?

I am trying to DIY my taxes with free fillable forms; my situation is not overly complex. I have my AGI, TurboTax gives the same AGI from the same inputs so everything checks out up to line 11 of the 1040. Then you need to enter tax owed; the official instructions point you to the tax tables, but TurboTax also provides a line item "explanation of refund" and their tax owed number does not match the tax tables, it's lower. Why? Is there some more favorable but still legal way of calculating tax owed other than from the tables using the tax brackets for exact marginal dollars? It doesn't make any sense otherwise. The numbers are close but not that close, within $50
posted by slow graffiti to Work & Money (3 answers total) 2 users marked this as a favorite
 
Best answer: One possible reason is that you have a small amount of Qualified Dividends or Capital Gains. In those cases, your tax owed is calculated on the Qualified Dividends and Capital Gain Tax Worksheet (see Line 12a text on page 31 and the form on page 33 in the 2019 1040 Instructions). Because those are taxed at a different (often lower) rate than normal income, they will often result in a lower tax owed once you do to the calculation per the worksheet.
posted by yuwtze at 12:27 PM on July 12, 2020


Response by poster: yep that's probably it, I have one 1099-DIV for a small amount, thanks!
posted by slow graffiti at 12:42 PM on July 12, 2020


The IRS tax tables are set up with income brackets jumping by $50 of taxable income at a time. So the tax will be the same for incomes of, say $71,951 and 71,999, because they are both in the same $50 interval. But alternatively, you could use the actual formula, which for that amount is (if you are filing single): $4,543 plus 22% of the amount over $39,475. TurboTax uses that formula (or one of the linked ones) rather than the tax table. So, if your income is $71,951 filing single, it calculates that tax as $11,687 (rounded to whole dollar), versus the tax table which says $11,693. That's only a $4 difference, though. If you're coming up with a bigger difference there is something else at play also.
posted by beagle at 12:45 PM on July 12, 2020 [1 favorite]


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