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Author: XCgeoff Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: 08 estimated taxes from turbotax Date: 4/7/2008 6:26 PM
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I finally finished up my 07 return with turbotax and it automatically calculated what it thought my 2008 estimated quarterly tax payments should be based on my 2007 data.

Here's where I am a little confused. I’m getting about a $1400 refund for 2007 and turbo tax told me I should make total estimated payments of almost $3000 this year. That’s about a $4400 swing which isn’t an insignificant percentage of my total tax owed. If it is basing the 2008 estimated taxes on my 2007 numbers, the only thing I can figure out is that there are changes in the tax code that would make me owe more tax in 2008 than 2007, but I can’t figure out why it would be that high. I live in Texas and pay no state income tax so I get to take the sales tax deduction. I think congress added that back for 07 at the last minute with the AMT “patch” they always do every year. Is turbotax thinking that I may owe AMT for 2008 because congress hasn’t patched it yet? Is there some other explanation?
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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100072 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 6:38 PM
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If you income is over $150,000, they maybe using the 110% of this years income as the safe harbor for next year.

Debra

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100073 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 6:43 PM
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I finally finished up my 07 return with turbotax and it automatically calculated what it thought my 2008 estimated quarterly tax payments should be based on my 2007 data.

Your description of this as "automatic" leads me to the conclusion that TT's suggestion is useless. How does it know how much has been withheld from your wages YTD? How much will be withheld?

I've always found the software packages pretty useless for forecasting ES requirements. If you're concerned, see IRS Publication 505 for the rules.

Phil

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Author: XCgeoff Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100074 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 6:55 PM
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Your description of this as "automatic" leads me to the conclusion that TT's suggestion is useless. How does it know how much has been withheld from your wages YTD? How much will be withheld?


I agree that the initial calculated taxes is basically worthless. I think that it takes all of the 2007 data and the amount withheld through 2007 and assumes that everything will be identical in 2008. I can manually input estimates for what my 2008 earnings, withholdings and deductions will be and have it recalculate my estimated taxes on numbers that are more realistic, but if it is telling me that I should pay an extra $4400 next year with no changes to any of my income/withholdings/deductions, I don't know that I would trust the number it gives me after I make changes. I'll just make sure that I have 110% of this year's tax withheld to avoid penalties and hopefully I won't have to write too big a check next year.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100075 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 7:00 PM
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I finally finished up my 07 return with turbotax and it automatically calculated what it thought my 2008 estimated quarterly tax payments should be based on my 2007 data.

Here's where I am a little confused. I’m getting about a $1400 refund for 2007 and turbo tax told me I should make total estimated payments of almost $3000 this year. That’s about a $4400 swing which isn’t an insignificant percentage of my total tax owed. If it is basing the 2008 estimated taxes on my 2007 numbers, the only thing I can figure out is that there are changes in the tax code that would make me owe more tax in 2008 than 2007, but I can’t figure out why it would be that high. I live in Texas and pay no state income tax so I get to take the sales tax deduction. I think congress added that back for 07 at the last minute with the AMT “patch” they always do every year. Is turbotax thinking that I may owe AMT for 2008 because congress hasn’t patched it yet? Is there some other explanation?


Pull up the estimated tax worksheet and see howt TurboTax made its calculations. I suspect that it assumed no withholdings for 2008. It does that so that your estimated tax payments will meet a safe harbor regardless of anything else. (You may have to go into "Forms" mode to get to the worksheet.)

Ira

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Author: fleg9bo Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100076 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 7:19 PM
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telling me that I should pay an extra $4400 next year with no changes to any of my income/withholdings/deductions

Maybe it is trying to prepare you for a Democratic administration. But that would be for 2009, not 2008.

--fleg

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100077 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 7:35 PM
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I finally finished up my 07 return with turbotax and it automatically calculated what it thought my 2008 estimated quarterly tax payments should be based on my 2007 data.

Here's where I am a little confused. I’m getting about a $1400 refund for 2007 and turbo tax told me I should make total estimated payments of almost $3000 this year. That’s about a $4400 swing which isn’t an insignificant percentage of my total tax owed. ...


There are, IIRC, four options you can give it to help it with your estimated tax. I think they are something like this.

1.) Enough so you will withhold enough to come up to 100% of your 2007 tax.
2.) Enough to come up to 110% of your 2007 tax.
3.) Enough to come up with what it estimates, with your help, your 2008 tax will be.
4.) I forgot what that one is.

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100079 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 9:42 PM
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Actually...

1.) Enough so you will withhold enough to come up to 100% of your 2007 tax.

This applies if your AGI is less than $150K.


2.) Enough to come up to 110% of your 2007 tax.

This applies if your AGI is $150K or more.


3.) Enough to come up with what it estimates, with your help, your 2008 tax will be.

Actually, its enough to pay 90% of what your 2008 taxes will be, although you certainly don't want to aim so closely that you end up with 89.9% and owe penalties.


4.) I forgot what that one is.

The last one is to owe less than $1000.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 100080 of 121061
Subject: Re: 08 estimated taxes from turbotax Date: 4/7/2008 9:56 PM
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The last one is to owe less than $1000.

...after applying only withholding credits (no ES payments).

There are two reasons I often just refer people to IRS publications. First, I'm too lazy to redo what my tax dollars have already paid for. Second, I don't run the risk of misstating things.

Of course, people often have unanswered questions after reading the pubs. IMO that speaks more to the quality of the law than it does to the abilities of the writer and reader.

Phil

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