What is myeffective tax rate 3 times my marginal? Shouldn't it be the opposite?

[Unionville]

I just got my taxes back. Every year my effective tax rate is much smaller than my marginal rate (usual case with most people).  This year my marginal is 10% and effective is 40%!  My AGI was only $23,000.  I can't get my head around it.  I am self employed (I understand I pay self-employment tax). 

Under what circumstances could an effective tax rate be so high, yet the marginal be so low?

My tax guy is really busy, so I thought I'd try here first and see if anyone had a clue.

[beltim]

Unless your taxes paid over the last year was about $9,000, there's a math error.  The only way I could see something like this happening is if you had a very large property tax item.

[Unionville]

Unless your taxes paid over the last year was about $9,000, there's a math error.  The only way I could see something like this happening is if you had a very large property tax item.

Yes I did way over-pay my quarterly taxes $16,000 (because in 2012 year I made 5 times more money and was forced to pay high quarterly in 2013).  Most of that will be refunded this year because I had a low income. Are you saying "overpayment" of taxes makes the effective rate higher? 

I assumed the effective rate had nothing to do with "overpaying" taxes (but rather, the amount of taxes actually owed).  btw - I have no large property taxes or anything atypical.

[beltim]

Unless your taxes paid over the last year was about $9,000, there's a math error.  The only way I could see something like this happening is if you had a very large property tax item.

Yes I did way over-pay my quarterly taxes $16,000 (because the prior year I made 5 times more money).  Most of that will be refunded this year now that I made so little. But why would "overpayment" of taxes make a effective rate higher?  I assumed it had nothing to do with "overpaying" taxes (but rather, the number should reflect the taxes actually owed).  btw - I have no large property taxes or anything atypical.

Sorry, by "taxes paid" I meant "net taxes paid," as in, taxes you paid in 2013 minus your refund.

[foobar]

Here is a rough example (not 100% right but close enough and obviously I haven't seen the OPs tax form) of what is going on:

55k of income
27k of 401(k) (17.5 yours +10k of company match)
5500 ira contribution
 = 23k of agi
7.7k of payroll taxes
1200 in federal taxes


1.2k/55k = 2% federal income tax rate
1.2/23k = 5% federal income tax rate
8.9k tax /23k agi = 38% effective tax rate
8.9/55k = 16% effective tax rate

AGI is not income and federal taxes are not the big tax on low income wage earners.

Unless your taxes paid over the last year was about $9,000, there's a math error.  The only way I could see something like this happening is if you had a very large property tax item.

[beltim]

I didn't even think about the tax preparer using AGI instead of total income.  That would be another (albeit silly) way to do it.  Nice, foobar!

[foobar]

It is how turbo tax does the math. Is it silly? Sure. But they are silly numbers to begin with.

I didn't even think about the tax preparer using AGI instead of total income.  That would be another (albeit silly) way to do it.  Nice, foobar!

[beltim]

It is how turbo tax does the math. Is it silly? Sure. But they are silly numbers to begin with.

I didn't even think about the tax preparer using AGI instead of total income.  That would be another (albeit silly) way to do it.  Nice, foobar!

Yes, Turbo Tax is silly sometimes.  Having to enter fellowship income under the "deductions" section instead of the "income" section, for example.