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Careful there. There is a revolting pro-rata calculation that applies to taxable refunds and state tax deduction.

Essentially if you make 4 equal payments of 2000 state estimated tax and you made the 4th payment in 2001, you can reduce your taxable refund by 25%. Of course you must reduce your state tax deduction by a like amount. Here's the yucky part.

Logic would tell you that if you make 4 payments of $1,000 and your refund is less than $1,000 then your overpayment was made in 2001 and you ought to be able to just ignore the refund and reduce your deduction. Unfortunately, the IRS has decided that the overpayment results from ALL payments and you can only reduce your refund by the PERCENTAGE that relates to the 2001 payment. BTW, your state withholding is assumed to occur evenly over the calendar year.

If you have entered all your payments and the dates you made them, into your software, it should calculate it correctly.

Are you confused yet?

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