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Question: Why is the software's tax calculation different from what I see on the pay stub?
Answer:
The software calculates federal income tax, after accounting for all deductions and credits, using actual current numbers.
The pay stub can be very different for a number of reasons:
1. Withholding. Employees can control the withholding through their W-4 selections. They can specify fewer or more exemptions than are likely, thus decreasing or increasing their tax withholding.
2. Deductions. Pay stub withholdings does not reflect itemized deductions that may apply, but these are reflected in the software.
3. Credits. Credits such as the Earned Income Credit, Child Credit, or Child Care Credit can affect taxes dramatically, especially for lower income individuals.
4. Self-employment. If the person has self-employment income in addition to his wage income, that would not be reflected on the pay stub withholdings but would be reflected on the tax calculation.
If you have any question how the software's tax calculation is done, you can see the calculation in detail on the View/Edit Taxes report.