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Fed tax rate doesn't add up
Old 04-14-2019, 07:06 AM   #1
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Fed tax rate doesn't add up

I had my taxes done by a cpa. And I ran a cross check through Taxcaster.

Neither match what I calculate for tax using IRS rules


Married filing jointly - did a roth conversion - ended up with a taxable income of $127,251

IRS says tax is:

10% of first $19050
$1905 + 12% over $19050
$8907 + 22% over $77400
$28179 + 24% over $165000
etc

I do the math and come up with a tax of $19874
Taxcaster has tax at $19354
CPA has tax at $19408

So cpa and Taxcaster are close - within about $50, but math from the IRS rules comes in about $500 more.

I know it's early am, but I've calculated this a dozen times and can't figure out why the difference.

Why is there such a difference?
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Old 04-14-2019, 07:25 AM   #2
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The IRS calc you used is applicable if all of your taxable income is earnings that were reported on a W-2.

If some of your income was Social Security, Qualified Dividends or Long Term Capital Gains, the math is more complex.
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Old 04-14-2019, 07:25 AM   #3
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Not all of it is ordinary income? Capital gains and qualified divs are taxed at a different rate. Check the worksheet for those. That's where my tax is always calculated from.
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Old 04-14-2019, 07:26 AM   #4
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You probably had capital gains and/or qualified dividends. If that is the case, then your taxes are figured based on a capital gains/dividends worksheet in the instructions, not the tax table.

The worksheet will also produce a lower tax than the table.
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Old 04-14-2019, 07:27 AM   #5
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Assuming you paid the CPA to do your taxes, I would ask why the amount is $466 lower than when you calculate tax using IRS formula. That's if your 100% sure your calcs and assumptions are correct.

If you push this through TurboTax, you might come up with a fourth number.
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Old 04-14-2019, 07:42 AM   #6
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Did you have any Foreign Tax Credits in your after tax account? REITS in an after tax mutual fund will also trigger the new Qualified Business Income deduction.
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Old 04-14-2019, 07:47 AM   #7
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MFJ, both over 65, $127,251 taxable income, Turbotax says $19,874 tax.

QBI (my best guess)
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Old 04-14-2019, 07:53 AM   #8
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Thanks all - I really had a brain cramp.

Some of the income is dividends. Dividends are entered separately than ordinary income in Taxcaster - and that is why it matches what the cpa got.

I can't believe I didn't figure that out.
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Old 04-14-2019, 08:30 AM   #9
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What about the standard deduction?
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Old 04-14-2019, 08:38 AM   #10
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Quote:
Originally Posted by audreyh1 View Post
What about the standard deduction?
That's subtracted before you get to taxable income.
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Old 04-14-2019, 12:10 PM   #11
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This thread reminded me of another, related issue, that I started a new thread for:

Marginal Tax Rate Estimate -It depends?

-ERD50
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