Initial time machine backup larger than actual computer harddrive

I've got an iMac with a 1TB harddrive and am trying to use a time machine set up to back up my harddrive. The external harddrive I'm using for my back up is also 1TB. I currently have about 135GB of free space on my iMac's harddrive and my external drive is completely empty. When I try to back up using time machine it tells me that the back up is 1.2TB and cannot fit on my 1TB external harddrive. What would cause the initial back up to be larger than the actual computers harddrive? Is there anything I can do to rectify this issue without me needing to purchase a larger external harddrive for back up?

Ikue wrote:
The external harddrive I'm using for my back up is also 1TB. I currently have about 135GB of free space on my iMac's harddrive and my external drive is completely empty.
That means you're trying to back up about 865 GB to a 1 TB drive; and that's not large enough for Time Machine.
Time Machine not only keeps copies of everything currently on your Mac, but also previous copies of things you've changed or deleted, so it needs a lot more space than the data it's backing-up. 
What's causing your immediate problem is, TM adds about 20% to the estimated size of the backup, for workspace on the TM drive and in case the estimate is too small.  So 865 GB + 173 GB = over 1 TB.
Long-term, you need a much larger drive for Time Machine, at least 1.5 TB, probably 2 TB.
Short-term, you can squeeze your backups onto the 1 TB drive by excluding some big stuff per Time Machine - Frequently Asked Question #10 and running a backup.
Then remove the exclusion, and run another backup.  Since the second backup will be much smaller, the additional 20% won't be so large as to exceed the size of the TM drive.
But TM won't be able to keep backups very long, and if it needs to do a large backup, there may not be room.

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