Qualified Dividends Entry

William

Q H&B 2017. There is a tax assignment for Schedule B, Qualified Dividends. I reclassified the tax category _DivIncTaxFree to use the tax assignment of Schedule B, Qualified Dividends.


Where does this income ripple thru to the Tax Planner? Appears nowhere.


I have CEFs that publish the monthly tax treatment of distributions so i can assign RoC, qual or non-qual dividend on monthly basis. RoC is covered but not qual div.


If the tax category "_DivIncTaxFree" is not used then t's only for reports?


In reading past entries it appears people have had to use LTCG for qual divi's.


I had hoped to use Miscellaneous and assign income to the _DivIncTaxFree now assigned to Sched B Qual Div.


I am retired living off income revenue. Quarterly tax payments are a must and I cannot for the life of me predict, using Q 2017 H&B on how much I might need to pay.


Thoughts communit?

Unknown

I would use a tax program or similar program for quarterly tax payments.  There is no way I would use Quicken tax planner for this purpose.  The tax planner is pretty good for simple cases, but it certainly has plenty of holes for the more complicated cases.

William

Any ideas on a suggested tax program or similar for such a purpose?

Unknown

William said:

Any ideas on a suggested tax program or similar for such a purpose?

Any of the tax programs should have a section where you can put in predictions for the "next year's estimated taxes".  At least any of the versions that aren't the most basic "free" ones.  I personally use TaxAct, but long ago I used TurboTax and it certainly had it in there too.  Note you are going to be using this year's tax program to predict next years taxes, but that is close as any program is going to be able to do since no one knows until the end of the year what the taxes really are, when the finalize the tax laws.

mshiggins

What is a CEF?

NotACPA

mshiggins said:

What is a CEF?

Closed End Fund.

Jim_Harman

You say

I am retired living off income revenue. Quarterly tax payments are a must and I cannot for the life of me predict, using Q 2017 H&B on how much I might need to pay. 

There are two issues with estimated tax payments: paying enough so you don't owe a penalty at tax time and not paying so much that you are making a big interest-free loan to the IRS.

I cannot give tax advice and your situation may be different, but as explained here
https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
it is generally easy to avoid paying a penalty - just make sure your withholding plus estimated taxes >= your prior year's tax due. As noted in the previous responses, TurboTax or other tax software will help with these calculations. Unless your taxable income or withholding changes significantly this year, you will only owe the difference or get a refund at tax time.

There is generally no need to figure the payments precisely, and often it is impossible because for example some funds pay a mixture of qualified and regular dividends and the percentage is not reported until after your last estimated payment is due.  

Jim_Harman

And to answer your original questions, the Tax Planner does not do a very good job for people whose income is mainly from investments. It knows to exclude income from investments in IRAs and 401ks and from securities that are marked Tax free in Security Details. but it does not know about qualified dividends, AMT, Health Savings Accounts, the Foreign Tax Credit, Capital Loss carryovers, or state taxes.

There is no good way that I know of to distinguish qualified from regular dividends when you are recording investment income, and as I mentioned earlier you may not know which is which until after the end of year anyway. For tax estimating purposes, you might call the qualified dividends long term capital gains, but then your capital gains reports will be messed up.

mshiggins

mshiggins said:

What is a CEF?

Thanks.

Jim_Harman

Quicken now has a tax line for qualified dividends and a box for them in the Tax planner, but the data must be entered there manually. There is still no way to differentiate between qualified and ordinary dividends when you are recording the transactions.

Since the Qualified/Ordinary information is not available in downloaded transactions, perhaps a good way to implement this would be to change the "Tax free" checkbox on the Edit Security details dialog to "Dividend type" radio buttons, with choices of Ordinary, Qualified, and tax exempt. The dividend entry dialog would remain the same, but the dividends could be put in the correct category behind the scenes, as they are today for tax exempt.

I realize that this would not be 100% accurate, because many mutual fund dividends are a mixture of ordinary and qualified, but it would lead to a much better tax estimate.

q_lurker

Jim Harman said:

Quicken now has a tax line for qualified dividends and a box for them in the Tax planner, but the data must be entered there manually. There is still no way to differentiate between qualified and ordinary dividends when you are recording the transactions.

Since the Qualified/Ordinary information is not available in downloaded transactions, perhaps a good way to implement this would be to change the "Tax free" checkbox on the Edit Security details dialog to "Dividend type" radio buttons, with choices of Ordinary, Qualified, and tax exempt. The dividend entry dialog would remain the same, but the dividends could be put in the correct category behind the scenes, as they are today for tax exempt.

I realize that this would not be 100% accurate, because many mutual fund dividends are a mixture of ordinary and qualified, but it would lead to a much better tax estimate.

Personally, I do not have an issue with all dividends going into the common box; not distinguishing between qualified and non-qualified.  But I understand others do care.  

Your "not 100% accurate" comment is the killer as far as I am concerned.  The qualified/not-qualified distinction does not occur at the security level -- it is a transaction level distinction.  One year all dividends from one security might be qualified; another year only 50%, 30%, 98%.  

As I see it, the expanded implementation of this would have to be at the transaction level.  a) by including both a qualified Div and a non-qualified Div on the Enter transactions "Income" window -- just as Div, Int, and CG distributions are separated.  b) Paired with that would need to be a DivQ transaction (and a DivNonQ?) that would be created from the Enter Transactions approach or could be manually entered by the user.  

Does that leave us with three transaction types?  Div, DivQ, and DivNonQ?  I would hope not because that just makes things more confusing.  Should the old Div Transactions be assumed to be qualified or non-qualified?  I don't think there is a basis either way, so I'd say no.  

So I still end up where I started - one Div designation is enough for me.  That is my $0.02.  

Bob_L

It is important to keep in mind that the tax planner is in fact a planner, designed to be a projection of income and taxes. So for example if you are looking at tax planner today and see yearly planned dividends of X, you can then enter Y as the amount of the above dividends that you expect to be qualified. I did a quick test of this and it appears to calculate the qualified portion at the cap gains rate, with the remainder at the marginal rate. (I also tested with a qualified number > than dividends and it put a message in the details below saying that something might be wrong.)



Seems to me this is a reasonable way to estimate the impact of qualified vs nonqualified dividends.

Rocket J Squirrel

It turns out that there is a built-in category _QualDivInc which you can un-hide and add to your category list.

markus1957

Bob L said:

It is important to keep in mind that the tax planner is in fact a planner, designed to be a projection of income and taxes. So for example if you are looking at tax planner today and see yearly planned dividends of X, you can then enter Y as the amount of the above dividends that you expect to be qualified. I did a quick test of this and it appears to calculate the qualified portion at the cap gains rate, with the remainder at the marginal rate. (I also tested with a qualified number > than dividends and it put a message in the details below saying that something might be wrong.)



Seems to me this is a reasonable way to estimate the impact of qualified vs nonqualified dividends.

@Bob L is spot on. In spite of the category being available it should not be used for individual transactions. Tax Planner is only set up to work as Bob L explained it. If you try to convert individual Div transactions to QualDiv transactions, your tax owed will not be computed correctly.  Only a User Entered amount representing the portion of Divs in the line above that are QDI should be entered directly into Tax Planner.