How can I be sure the tax planner is working?

Last year it est. we would be $5000 back but instead we had to pay. Now I am paying Estimated Taxes (1040 es) to the tune of $10,000 but this year the tax planner is estimating we we get back $25,000. I have checked everything and it is in the right places. I can not figure this out. Any suggestions?

Best Answers

  • Mark1104
    Mark1104 Member ✭✭✭✭
    Accepted Answer
    do you use tax software to complete your taxes each year? 

    Quicken really isn't a 'tax tool' and with all the government changes for COVID I would be very wary about using Quicken to estimate your tax liability.  if you use a tax software (e.g. turbotax, H&R block, Taxslayer), best to use their tools to estimate taxes for 2021.  just my two cents 
  • Ps56k2
    Ps56k2 SuperUser ✭✭✭✭✭
    edited June 10 Accepted Answer
    I would walk thru the various fields of the Tax Planner and compare to your 1040 -
    and find out why they are different -
    Also - verify that your Category settings are used to feed the correct IRS Tax Line Items...

    Quicken Subscription - Windows 10

Answers

  • Mark1104
    Mark1104 Member ✭✭✭✭
    Accepted Answer
    do you use tax software to complete your taxes each year? 

    Quicken really isn't a 'tax tool' and with all the government changes for COVID I would be very wary about using Quicken to estimate your tax liability.  if you use a tax software (e.g. turbotax, H&R block, Taxslayer), best to use their tools to estimate taxes for 2021.  just my two cents 
  • lmsandling
    lmsandling Member ✭✭
    I use TurboTax but have used the estimator in quicken for several years it has always been within $100 either way before But not last year. Thanks for your answer.
  • Ps56k2
    Ps56k2 SuperUser ✭✭✭✭✭
    Quicken can do pretty good with the basic info it has -
    However, with any stock sales, Cap Gains, and other things that lead to a higher AGI - it can be frustrating.
    It would be interesting to compare your Quicken Tax Planner from last year
    to your actual tax filing, and see exactly where it was off & why.
    Once I figured out the areas that Quicken was blind.... I could better extimate how much to expend for 1040 ES.
    Quicken Subscription - Windows 10
  • lmsandling
    lmsandling Member ✭✭
    I did find an issue with my IRA withdrawal but the total estimated 1040ES payments are twice as much as what we owed. So this year so far it estimates we will get all the 1040ES money back? Make no sense.
  • Ps56k2
    Ps56k2 SuperUser ✭✭✭✭✭
    edited June 10 Accepted Answer
    I would walk thru the various fields of the Tax Planner and compare to your 1040 -
    and find out why they are different -
    Also - verify that your Category settings are used to feed the correct IRS Tax Line Items...

    Quicken Subscription - Windows 10
  • lmsandling
    lmsandling Member ✭✭
    Thanks for all the great help. I actually did have a line item error. But my biggest question is why do you have to prepay the next year double what you owed. Even the IRS can give me a good answer.
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited June 10
    "Thanks for all the great help. I actually did have a line item error. But my biggest question is why do you have to prepay the next year double what you owed. Even the IRS can give me a good answer."
    What I think you're saying here - reading your original post and follow-up posts - is that when you completed your income tax return last year you had to send in a check with the tax return for $5,000 and now you're making estimated tax payments (in addition to any taxes being withheld?) of $10,000.
    Correct me if I'm wrong.
    The honest answer to your direct question of "why do you have to prepay the next year double what you owed" is
    "Nobody here can answer your question because we don't have access to your 2020 income tax return and we don't know what information you entered (if any) into your income tax preparation program about what you think your 2021 income tax return will look like."
    Generally you want to pay enough taxes - withholding plus estimated - to avoid being underpaid and incurring penalties, but there are "safe harbors" you can get into that mean you can owe the IRS a ton of money and not incur underpayment penalties.  If you have significant income that's not subject to withholding - capital gains and dividends, for example - then you might have to pay estimated taxes.
    All I can tell you is that there's no "law" that says "if you have to pay $X when you send in your income tax return then you have to pay $2X in estimated taxes next year."
    You might want to educate yourself about estimated taxes so you're confident that you know what you're doing.
  • Mark1104
    Mark1104 Member ✭✭✭✭
    edited June 10
    you don't have to pay more than you are EXPECTED to owe.  as I stated above, Tax Planner in Quicken really is not an effective tax planning tool in my opinion.  What software do you use for your tax preparation and submission?  Best to use that package to estimate your taxes and what you should be estimating for quarterly tax payments. 

    Why do you think Quicken Tax Planner is accurate (yes, you checked everything, but that assumes it calculates correctly). 

    For example, if you have children I don't know how Quicken would calculate the child tax credit (up to $2000 per child and really up to $3600 this year).  another example: if you do IRA rollovers to an Roth IRA using in-kind transfers, I don't know how Quicken would recognize that as taxable income. 

    How did you calculate your estimated quarterly taxes? what software did you use? 
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