Fed tax rate doesn't add up

[Ronstar]

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?

 

[cathy63]

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.

 

[RunningBum]

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.

 

[SecondCor521]

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.

 

[target2019]

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.

 

[CardsFan]

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.

 

[target2019]

MFJ, both over 65, $127,251 taxable income, Turbotax says $19,874 tax.

QBI (my best guess)

 

[Ronstar]

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.

 

[audreyh1]

What about the standard deduction?

 

[SecondCor521]

What about the standard deduction?

That's subtracted before you get to taxable income.

 

[ERD50]

This thread reminded me of another, related issue, that I started a new thread for:

http://www.early-retirement.org/for...te-estimate-it-depends-97328.html#post2222217

-ERD50