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My total income this year was $16,604 (wages, interest, and business income).

My deductions (including IRA, personal exemption, standard deduction, and self employment tax) was $17,404.

TurboTax says I owe $3,300 in federal tax. Can this be correct?

  • Are you married? Are you a dependent? Did you get a health insurance subsidy? – Bishop Apr 8 '15 at 18:16
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    I agree with the others: check all your numbers, make sure they're entered in the right places, look at the generated forms and see what appears to be odd about them. This isn't impossible depending on what you haven't told us, but it sounds like a typo. – keshlam Apr 8 '15 at 19:18
  • @keshlam Yeah, you definitely need to check everything. In 2013 I fat-fingered an extra digit on schedule D--for $0 effect. In 2014 the computer imported the result--and I ended up amending and paying close to $2k in additional tax when I caught the error. Errors can be very sneaky! – Loren Pechtel Apr 9 '15 at 2:14
  • How big was your state tax return from 2013? Given your income I don't expect it would be too big, but if your previous year state return was large enough you might owe this much in federal tax. – enderland Apr 9 '15 at 12:39
  • Because you said you deducted your IRA, it sounds like you have a Traditional IRA. You should be doing a Roth IRA, not a Traditional IRA. The Roth uses after-tax dollars; the earnings grow tax-free; and you can take out your basis at any time (i.e., it has better liquidity). In your tax bracket, the Roth is a no-brainer. – Logical Fallacy Apr 9 '15 at 16:10
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There's one factor the previous posters apparently missed here:

You say "self-employment tax"--in other words, at least some of that $16k is from self employment. In a normal employment situation the FICA tax is taken out of your paycheck, it's normally spot on and generally doesn't show up on your tax return.

However, for the self-employed it's another matter. You pay the whole 15.3% from the first dollar and this does show up on your tax return. If it's all self employment money you would have about $2.5k in tax from this.

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    Nice catch. Although TurboTax is friendly enough that Michael should see that's where it came from, it's good to mke it clear. +1 – JTP - Apologise to Monica Apr 8 '15 at 20:36
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No, it's not possible.

Even if you had no deduction or credits, your federal tax on $16,604 would be:

$9075 @ 10% = $907.50 + $7529 @ 15% = $1129.35

= $2036.85

That assumes you are filing as single.

There must be more to the story. Typo in your income numbers? Also, what do you mean by a self-employment tax deduction?

Maybe update your question to include a breakdown of everything you entered?

Edit:

As noted in Loren's answer, it seems that it is indeed possible in at least one case (self-employment taxes).

  • Depends. If most of the income was from business (reported on Schedule C/SE), he would have to pay Social Security taxes on the net income (about 12%), which aren't affected by deductions. $3300 seems quite high, though: I paid about $2K on $15K self employment income last year. – jamesqf Apr 8 '15 at 18:20
  • Phil. His $16604 was gross. $10,150 off the top for standard deduction and exemption. Stopping right there, 10% = $645. Your math is for taxable income of $16K. – JTP - Apologise to Monica Apr 8 '15 at 18:22
  • @JoeTaxpayer yep, I was trying to illustrate just how impossible it was (note that I said "even if you had no deductions"). – Phil Sandler Apr 8 '15 at 20:22
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    I wouldn't state "no, it's not possible". Just about anything is possible, given the vast complexity of the tax code. – msouth Apr 9 '15 at 4:35
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I'm going to echo Phil and say that you should add more information.

That being said, I think it is possible for you to owe the government that much. If you received a federal health insurance subsidy and live in a state that didn't expand medicaid, you could have received a subsidy through out the year that you did not end up qualifying for.

It appears you are outside the medicaid limit of 133% of the poverty level($11,670) or $15,521.

If you received a subsidy of $275 a month from the marketplace, you would have received $3300 worth of aid from the government that you don't qualify for. Now they are expecting you to pay it back.

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As a CPA I can say, without a doubt, you do not owe any federal income tax. However, assuming all of you income was from your business and therefore subject to self-employment tax and you had no healthcare coverage, you would owe:

$2,523 in Self-Employment Tax 645 in Healthcare Penalty


$3,168 Total Amount You Should Owe.

Assuming you have given us the right numbers, $3,300 sounds too high.

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