How do I categorize my Federal Tax payment on the income tax form?

Something that I thought would be obvious has me stumped. I paid the amount owed in my 2021 taxes in April 2022 but cannot find how to categorize it for proper entry on the Tax Form. I would think there would be a Tax Line in the Schedule 1040 to report Paid Tax. there isn't. Where do I list the payment I made for my prior year's taxes?
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Best Answer

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    Answer ✓
    If @Rocket J Squirrel 's assumption is correct, then paying for 2021 Fed income tax in 2022 is not a tax deductible expense for the current tax year.  It would be if it is payment for State income tax, but not for federal income tax. In fact, Federal income tax payments are never tax deductible.  So, there is no place to enter a Fed tax payment for a prior year in the current year's tax return.
    You can use the Tax:Fed category to record your 2021 tax payment if Quicken allows you to assign it to the 2021 Fed taxes paid so it does not show up as 2022 Fed taxes paid.  If it does not prompt you to do that then you could create a custom expense category and maybe name it Tax:Fed_For Prior Year or something like that...but do not assign a tax line item to it so it will show up in reports as a non-deductible, non-tax related expense.
    (QW Premier Subscription: R44.20 on Windows 11)

Answers

  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    edited January 22
    A standard category for this is Tax:Fed
    If you do not see this when trying to enter the category into the transaction:  Click on the drop-down arrow for the category field.  That should bring up a popup.  Check the box in the popup for Shown hidden categories and then try selecting or entering this category, again.  After selecting and entering that category it should be captured properly in the Tax Reports.
    Did this help resolve the issue for you?
    (QW Premier Subscription: R44.20 on Windows 11)
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Hi @Ken W.,

    As noted above most folks use "Tax:Fed" (which is a standard category in Quicken for Federal tax payments) when paying both estimated Federal Taxes and payments made when filing their tax returns (i.e. the balance due). And because between January 1st through April 15th folks can be paying taxes that could apply to either the prior year (like balances due when filing their prior year return, or estimated taxes for the current year) Quicken is programed to ask this question when Federal tax payments are being recorded 

    If you answer "Yes", the payment is treated as relating to the prior year (in this case 2022) and if you enter "No" it will be applied to the current year (2023 in this case).  And there are comparable categories for state taxes as well which prompt similar pop-up questions.

    Hope this helps to clarify things!

    Frankx

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  • Rocket J Squirrel
    Rocket J Squirrel SuperUser ✭✭✭✭✭
    edited January 22
    I believe this question is about Tax Line Items, not so much about Categories.
    Tax Lines are there to track and plan how much you've paid, what deductions you can claim, etc., all leading up to that final payment or refund. There is purposely no Tax Line Item for the final payment on your 1040 (using Tax:Fed or whatever you name your Category) because it doesn't add or subtract to or from anything else. It's the end result.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription (US) on Win10 Pro.
  • Boatnmaniac
    Boatnmaniac SuperUser ✭✭✭✭✭
    Answer ✓
    If @Rocket J Squirrel 's assumption is correct, then paying for 2021 Fed income tax in 2022 is not a tax deductible expense for the current tax year.  It would be if it is payment for State income tax, but not for federal income tax. In fact, Federal income tax payments are never tax deductible.  So, there is no place to enter a Fed tax payment for a prior year in the current year's tax return.
    You can use the Tax:Fed category to record your 2021 tax payment if Quicken allows you to assign it to the 2021 Fed taxes paid so it does not show up as 2022 Fed taxes paid.  If it does not prompt you to do that then you could create a custom expense category and maybe name it Tax:Fed_For Prior Year or something like that...but do not assign a tax line item to it so it will show up in reports as a non-deductible, non-tax related expense.
    (QW Premier Subscription: R44.20 on Windows 11)
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    edited January 23
    Hi @Ken W.

    A couple of things:

    Federal taxes are never a deductible item - for either federal tax purposes (think IRS form 1040) nor for state income tax purposes (regardless of your state).  So in Quicken, most folks want only to make sure that federal taxes are categorized so that they can know how much federal taxes they paid for a given year, so they can include that total on their federal tax return (and compare that total for accuracy before they file) and perhaps to compare that amount to those paid in prior years.

    1) In your initial post you said "I would think there would be a Tax Line in the Schedule 1040 to report Paid Tax. there isn't. 
    This statement is actually incorrect.  Every tax form has a place where total federal taxes paid, applicable to that year, need to be recorded.  On the Federal form 1040 for 2022, it is Line 33.  That line is the total of all Federal taxes paid applicable to the Tax Year 2022 (which would typically include tax withheld from a employee's paycheck, quarterly Federal estimated taxes paid throughout the 2022 year, and after the year - in the case of 4th Quarter 2022 estimated taxes due on 1/15/23). 

    2) You also said "I paid the amount owed in my 2021 taxes in April 2022 but cannot find how to categorize it for proper entry on the Tax Form."  The answer to this question (as noted already immediately above) is "the amount owed in your 2021 taxes" is not entered on your 2022 tax return at all.

    That being said, in Quicken it is recorded as I noted above, so that Quicken's reports - and particularly in its output for tax preparation purposes - it is recorded in the proper tax year.

    Hope this clarifies things above.

    Frankx

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  • Ken W.
    Ken W. Member ✭✭✭
    Much thanks to all who replied. All answers were helpful and Boatnmaniac provided the best solution. Seems, as usual, the problem was caused by the loose nut on this side of the keyboard! What I needed to do was provide a Category entry for my 2022 Tax payment in April 2022. I neglected to click on the Taxes in/Federal Tax line in Categories, select Unassigned Tax Item and click the Tax Related box. Doing this provided the record in my Tax Report indicating that I completed payment of my 2022 Federal Income Tax and did not affect the amounts in my Return. That's exactly what I was looking for. Again, thats to all who took the time and trouble to respond.