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Calculating Tax: IRS computation worksheet vs. tax brackets

Calculating Tax: IRS computation worksheet vs. tax brackets


  #1  
Old 05-08-21, 03:51 PM
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Calculating Tax: IRS computation worksheet vs. tax brackets

Greetings, I'm doing taxes (last minute as usual). Ordinarily I use the tax computation worksheet in the 1040 booklet. I did so, but then calculated according to the 2020 tax brackets. I have to say, there's quite a difference between the two, nearly 4000 dollars. Why would that be?

The computation worksheet has one multiply total income from line 15 by 22% marginal tax rate and then deduct a standard amount of 8420 (for married persons). Is this simply a "convenient" sum and not necessarily the precisely correct sum?

Calculating by tax brackets, the first sum is 10% of 19250, followed by 12% of the next 61000, followed by 22% of the remaining 50000.

I can file any way I like, I'm sure, as long as I have the necessary forms for a potential audit. I just want to know if calculating using the 2020 brackets is the right way to go instead of trusting the IRS tax computation worksheet.
 
  #2  
Old 05-08-21, 07:35 PM
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Looking at the 1040 instruction booklet, Line 16 "Tax" says to use the calculation worksheet to calculate tax if you have $100K or more in taxable income. If you're looking at the tax schedules in the back, on page 111, it also notes, with a bold "caution" label, not to use those schedules for calculating tax. I don't know why they insist on using the worksheet, but since they specifically say to use the worksheet, I wouldn't assume that you have any leeway to calculate it another way.

That said, I ran some numbers. Taking your 19250 + 61000 + 50000, I get $130,250 for your taxable income.

Per the worksheet, using married filing jointly, at least $100,000 but not over $171,050:
$130,250 x 0.22 = $28,655.
$28,655 - $8,420 = $20,235

Using the tax schedule on page 111 (even though it says not to), "if your taxable income is over $80,250 but not over $171,050, the tax is $9,235.00 + 22% of the amount over $80,250":

$130,250 - $80,250 = $50,000
$50,000 x 0.22 = $11,000
$11,000 + $9,235 = $20,235

If I use your tax bracket figures:
.10 x $19,250 = $1,925
.12 x $61,000 = $7,320
.22 x $50,000 = $11,000
Sum = $20,245

Also, it's supposed to be 10% up to $19,750, not $19,250 as you listed, though I doubt that impacted your calculations significantly. Maybe that accounts for the $10 difference between the tax bracket sum and the other two calculations.

I am not a tax expert, lawyer, mathematician, or any of that, just a working Joe who has to yak up money to pay the man every year. But based on my rough math, and not addressing alternative minimum tax, etc., I don't see how you got a $4,000 difference. I humbly suggest you might want to check for a math error somewhere.
 
  #3  
Old 05-09-21, 02:09 PM
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Thanks, SuperSquirrel. Oh, the difference might have been the subtraction of the standard deduction and child tax credits. But, as you say, page 111 instructs one not to use the schedules to calculate tax. I guess the only safe way is to roll with their formula on the worksheet even though it seems to cheat me.

Time to write that check for the unpaid amount and post it....
 
 

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