# US Taxes - Confused



## RetiredAbroad (Feb 3, 2019)

I am doing my 2021 US return online, and I cannot wrap my head around something... Maybe someone can explain things to me.

When I get to Form 1040 line 15 (taxable income), it shows $8896. At the 10% rate, I expect to owe $890 in tax. However, when I use the IRS Fillable Forms online, their calculations show $0 tax on Form 1040, line 16. 

Also, when I fill out a Qualified Dividend & Capital Gains Tax Worksheet (result $668) and then use that to fill out a Foreign Earned Income Tax Worksheet (line 4, $668; line 5, $668) and do the math ($668 minus $668), I too come up with $0 tax to enter on line 16!!

To triple check the calculations, I signed up for both OLT and Taxslayer and entered all my tax data online, and both of those programs also showed $0 tax on Form 1040, Line 16. Plus, their worksheets for qualified dividends/capital gains and for foreign earned income looked exactly like mine ($668 - $668 = $0 tax).

How can I have $8896 of taxable income on line 15 but owe $0 tax on line 16??? I just don't get it.

I'm happy with the result, but I don't want to file and later have the IRS coming after me if something was wrong with the math and I actually owed $890.


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## 255 (Sep 8, 2018)

@RetiredAbroad -- Your statement: "When I get to Form 1040 line 15 (taxable income), it shows $8896. At the 10% rate, I expect to owe $890 in tax. However, when I use the IRS Fillable Forms online, their calculations show $0 tax on Form 1040, line 16." I guess I'm a little confused. If your calculated number for line 15 is $8,896.00, then per the tax table in the instructions, your tax due would be $888.00. All the default numbers on the fillable forms are zero -- you need to type in the tax amount. The fillable forms do not calculate anything and the result for any line will be zero unless you type something in. If you really aren't using the IRS's fillable forms, I have no knowledge.

In reading the line by line instructions for line 16 -- it appears that a lot of different taxes have been combined (that I'm not familiar with.) I also have no experience with the software programs you are using, but if all three come up with the same numbers and you entered your data correctly, I'd just accept that they are probably right. Maybe you can backtrack the programs calculations and find what's happening -- sleep on it for a day first. Then just submit the return, with zero due, and keep a grand in a savings account if the IRS comes back and asks for it -- you might as well get interest. Sorry I couldn't be more help. This type of thing also drives me crazy (until I find the solution!) Cheers, 255


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## RetiredAbroad (Feb 3, 2019)

Thanks. 


> >...per the tax table... your tax due would be $888...


You're right. As I was typing, I didn't pause to re-check the tax table. I was simply rounding off 10% of $8896 and I meant to write "_about_ $890." $888 is indeed the precise amount given in the tax table.



> > Maybe you can backtrack the programs calculations and find what's happening


Thanks. I've slept on it and gone back over the calculations, and I've figured out that my $0 in total tax somehow comes from a reduction due to an excess involving a mathematical interaction between my foreign earned income and my capital gains. I say that because one of the worksheets generated by Tax Slayer gave me a clue. In the margin there was a tiny, parenthetical notation: "(*FEI CGXS==5351*)". 

*FEI CGXS??? *Presumably that's short for "foreign earned income" and "capital gains excess." 

Indeed, my Qualified Dividends and Capital Gain Tax Worksheet calculation (Line 3) reveals a capital gains excess and, for the sake of the worksheet calculations, it lowers my capitals gains from 11,899 to 6,548, which is a difference of *5,351*.

OK. That's a reduction. Not zero, but a reduction. I get that. What I can't wrap my head around is the logic behind $0 tax since a fair portion of the amount on Form 1040 Line 15 is not qualified dividends/capital gains, (and since my foreign income was already excluded from taxable income using Form 2555.) It seems like I'd owe something on the income from other sources included on Form 1040 Line 15.

Anyway, as you suggest, I am going to sleep on this for at least one more night, reread the extremely confusing instructions at the bottom of the Foreign Earned Income Tax Worksheet, and redo the worksheets yet again. If I get zero again the next time, that's it. I'm done.


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## RetiredAbroad (Feb 3, 2019)

CONTINUED:

Below is something I just found online. It's someone's attempt at explaining what's going on. 
_
"...when the foreign earned income exclusion completely eliminates all earned income, and when there is very little ordinary income such as interest, the result is a large capital gains excess, which is simply the remaining standard deduction applied to Q-div and L-cap-gain, after first being applied to ordinary income. For the purpose of the Foreign Earned Income Exclusion Tax Worksheet (FEIETW), a second QDCGTW is filled out with line 4 reduced by the capital gain excess."_
SOURCE: https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/how-to-correctly-adjust-qualified-dividends-and-long-term-capital-gains-on-line-1a-of-form-1116-when/00/2362086

After reading it, I have a better understanding what a "capital gains excess" is, and how it can lower the tax due. But I still don't get why the result is $0 tax in my case.


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