About Using the Tax Planner to Estimate Taxes in Quicken Deluxe, Premier, or Home & Business

The Quicken Tax Planner is your tax management control center. You can import data from tax software, change your marital status, enter annualized values for certain types of income or expenses, and estimate the amount you owe or the size of your refund.

The Tax Planner serves as the Quicken tax management control center. Once you categorize your transactions, you can use the Tax Planner to import data from tax preparation software, enter data that may not be reflected in Quicken transactions (such as marital status or annualized values for certain types of income or expenses), and estimate the amount of taxes you may owe or the size of the refund you may receive.

Occasionally the IRS changes the information required on IRS tax forms and schedules. Most changes to IRS tax forms occur in January and often affect only specialized forms that most people don't need to file. When this happens, Intuit provides an updated list of tax form assignments (the TAX.SCD file).

If the IRS makes any changes to the forms you file; however, you need to obtain a new copy of the TAX.SCD file. You can get a current copy of this file in new releases or updates of Quicken.

If you are a TurboTax user, your Final Edition will include an updated TAX.SCD file in time for you to file your annual returns. When you install TurboTax, the updated TAX.SCD file is copied to your Quicken folder.

• Capital gain tax rate cuts extended

  In 2003, congress lowered the maximum dividend rates for most (but not all) dividends and capital gains to 15 percent for qualifying taxpayers. Taxpayers in the 10- and 15- percent tax brackets are eligible for an even lower rate of 5 percent. In 2008, the rate for taxpayers in the 10- and 15-percent tax brackets fell to zero.

  As originally enacted, these tax rate cuts were temporary and were scheduled to expire at the end of 2008. However, the Tax increase Prevention and Reconciliation Act of 2005 extends the cuts for two more years, through December 31, 2010. However, they are still considered "temporary."

  There are some situations when other rates will apply to gains on certain types of property:

  The long-term capital gains rate on business or investment real estate (called "section1250 property" on the tax forms) will be 25 percent up to the amount of depreciation on the property while you owned it. However, there are no losses counted in the 25 percent rate group and any loss from this group must be taken into account in computing net gain or loss the in the 15 percent rate group. Also, the long-term capital gains rate on collectibles such as art, rugs, jewelry, precious metals or gemstones, stamps or coins, fine wines, or antiques is 28 percent.

  The same 15 percent (or 5 percent) maximum tax rate also applies to dividends paid by most domestic and foreign corporations after December 31, 2002, through the end of tax year 2008. You must have held the stock on which the dividend is paid for more than 60 days during the 120-day period that begins before the ex-dividend date. Certain dividends from regulated investment companies (such as mutual funds), real estate investment trusts, and certain foreign corporations do not qualify for the reduced rates.

  These changes do not apply to tax-deferred accounts, such as IRAs, 401(k)s, SEP-IRAs, Keogh plans, and so on.

  Quicken does not differentiate between dividends that do and don't qualify for the lower tax rates, and instead uses the tax rates for nonqualifying dividends in all tax calculations to provide the most cautious tax scenarios. The new tax tables are applied, however.

• What is the Tax Planner?

  The Tax Planner collects information from a variety of sources, evaluates it based on current tax law and your personal financial situation, and then estimates your tax liability (or refund) for the current year. You can import information from TurboTax, use information from your Quicken data file, or enter information manually.

  Since your taxes are based on a year's worth of financial information, the Tax Planner makes an educated estimate, called a projection, of the final, year-end total of each tax schedule item; for example, even if it's only the beginning of May, the Tax Planner projects your current year-to-date earnings, or the amount of Social Security tax already withheld, or the amount of interest you've earned on your accounts, to arrive at a total for the year upon which it bases its estimates. One way the Tax Planner can do this is by counting up all the remaining instances of a scheduled transaction (for instance, if you've scheduled your paycheck ) for the rest of the year (this is recommended). Another way is by annualizing current amounts, or saying, in effect, that if you've earned $20,000 by the end of April, you'll earn $60,000 by the end of December. You may also earn a bonus or two over the course of the year; you can add those bonuses to the Tax Planner's total to make the estimate of your taxes even more accurate.

  Notes

  • The Tax Planner supports only U.S. currency. If you use non-U.S. currency accounts, the Quicken tax tools in the Tax Center (including the Tax Planner) ignores amounts from these accounts.
  • The data in the Tax Planner is projected for the current tax year. If the projection is based on last year's data (TurboTax or Quicken), a 3 percent inflation rate per year is used to project future amounts.
• Assembling your tax information

  Before you enter or review information in the Tax Planner, assemble all your tax-related paper information so that you can be sure your tax estimates are comprehensive. This includes:

  • Income records: Paycheck stubs are usually your best source of income information, particularly in midyear, since most paycheck stubs show both current and year-to-date earnings and deductions. If you are estimating at year end, you will also want to assemble your W2 , W-2G, and 1099 forms.
  • Itemized deductions and tax credit records. These include:
    • Medical and dental payment records
    • Real estate and personal property tax receipts
    • Interest payment records for your home mortgage
    • Records of payments for child care
    • Dependent expenses that may be tax related
    • Charitable contribution receipts
  • Tax publications: You can get them from the IRS, public libraries, and your tax professional. Most bookstores stock a variety of commercial tax instruction and information books. You can also get them online. To go to the appropriate Web site, open the Tax Center, and then, in Online Tax Tools, click Federal Tax Publications.
  • Previous tax returns: Copies of your returns from previous years may be helpful for reference. Remember that some figures won't be valid for 2006 or 2007.
  • Quicken tax schedule report and capital gains report: Run these reports to help you check whether all your tax-related financial information is included in your Quicken files.
• Handling multiple copies of the same tax form

  What if you have two jobs and receive two W2 forms? Or you own two businesses, each of which requires you to fill out a Schedule C form (Profit or Loss from Business)? You'll want to keep these kinds of information separate when you prepare tax reports or export data to tax preparation software. To do so, set up and use classes and copy numbers so that Quicken knows you're tracking multiple copies of the same form.

  Once you've set up the classes and assigned appropriate copy numbers, use the classes with all relevant transactions in your registers.

• Creating tax-related reports

  Depending on the type of information you need, you can create any or all of the following tax-related reports:

  • Tax summary report: When you want a report that shows the total amount of tax-related income and expenses, create a tax summary report. By default, this report includes all accounts in the current file except tax-deferred investment accounts such as 401(k) and IRA accounts.
  • Tax schedule report: When you want a report that contains the exact figures you need to enter in your Form 1040 and other schedules, create a tax schedule report. You must also run a tax schedule report if you plan to export tax information to tax software.

  The report gathers figures from all accounts in the current file and from all categories that have been assigned to a tax form and line. Several categories or accounts can contribute to the same figure in the report. For example, the Salary line on Form W2 can include both regular salary and bonuses.

  When you create a tax schedule report, check the figures against any limits defined by the IRS, such as the maximum deduction allowed for IRA contributions; the report gives your personal totals and does not track IRS limits. Also, be sure that you've already entered all your tax-related transactions into Quicken. (Quicken comes with the investment categories _DivInc and _IntInc assigned to Schedule B. The tax schedule report subtotals the amount for each category by investment account, but not by security.)

  • Capital gains report: When you want a report that lists realized gains from investment transactions, create a capital gains report. The capital gains report lists your long-term and short-term capital gains transactions in a format suitable for Schedule D. You can also export capital gains reports to tax preparation software.
  • Schedule C report (only in Quicken Home & Business): Create this report when you want to see Schedule C transactions subtotaled by line item. You should enter Schedule C information if you operated one or more businesses as a sole proprietorship during the year, or if you and your spouse had separate businesses. If you need to file more than one Schedule C, be sure that you have set up Quicken to handle multiple copies of the form. Also, if you and your spouse had separate businesses, be sure to track them using separate classes so the Tax Planner can keep your business income separate from that of your spouse.

  If you have set up classes so that you can use multiple copies of tax forms, be sure to customize the tax report to use these classes.

• Importing a TurboTax data file

  If you have your previous year's TurboTax data file, you should import it into Quicken before you begin using the Tax Planner. Importing TurboTax data gives you a head start in developing your tax estimate and can save you a lot of data entry time.

  Notes

  Importing data from TurboTax does not bring over alternative minimum tax adjustments and preferences. If you paid alternative minimum tax last year with your federal income tax return, you may want to update the alternative minimum tax calculation on the Other Taxes and Credits page in the Tax Planner.

• Viewing Tax Planner data

  When you first view your data in the Tax Planner, you may be surprised to find some of the fields already filled in. This is because Quicken can track data it knows is tax related, no matter where that data is entered. The amounts you see in the Tax Planner can come from any of the following data sources, listed in order of priority (figures higher on the list override those lower on the list):

  • User-entered data (figures that you added or edited)
  • Current-year Quicken source data, such as transactions you entered, scheduled transactions, or year-to-date data annualized where applicable
  • Any prior-year TurboTax data you imported into Quicken, adjusted for inflation where applicable
  • Prior-year Quicken source data, adjusted for inflation where applicable

  You may also find that some amounts displayed reflect a combination of prior- and current-year amounts. For example, Schedule E rent and royalty information imported from TurboTax appears under the Rental Income category in Quicken. If you import such a TurboTax file and have current-year royalty income, you may see both the prior-year amount and the current royalty income as adjusted or combined income in the Tax Planner.

  When you're viewing the properties of a field in the Tax Planner, you may see the data source for a projected value identified as User Entered when the only sources of information are TurboTax and Quicken. You may also note that this amount is not the sum of the projected TurboTax and Quicken amounts displayed. This may occur for the following items:

  • Your wages and salary
  • Other adjustments to income
  • Real estate and other tax
  • Mortgage and other deductible interest
  • Charitable contributions

  Each item listed above is a combination of two or more tax categories. Each component category can include both a TurboTax value and a Quicken source value and is independently subject to amortization or adjustment for inflation. The amount you see as the User Entered value is the sum of the highest-ranking value within each component category.

• Viewing Tax Planner details

  If you're not certain about a figure in a Tax Planner field, you can view the details of that field, which means you can see the transactions Quicken used to arrive at the amount in question. Viewing the details of a Tax Planner field tells you not only where the data came from but also what type of data it is-in other words, whether it's Quicken data (such as a transaction you've entered or scheduled), TurboTax data, or data you entered. You can also edit it if necessary.

• Updating information in the Tax Planner

  Before you gasp at the Remaining Tax Due or Refund Due number displayed in the Tax Planner, be sure to review all the figures on which that number is based. To estimate your taxes for a full year, be sure that all information in the Tax Planner reflects your best estimate of projected annual amounts. After you have verified all your financial information projected for the year, the Tax Planner calculates your total projected tax bill or refund due.

  • Remaining Tax Due: The projected amount of tax you could owe at year's end.

  If the remaining tax due is more than $1000, you may need to make quarterly estimated tax payments or increase withholdings to avoid penalties and interest when you file your return. The regulations about who needs to file quarterly estimated tax payments are complex, and you should consult IRS publications or a tax professional to make a final determination, but a tax due of more than $1000 should be a warning to investigate whether you need to file quarterly estimated tax payments or change your withholding allowances on your W-4.

  • Refund Due: This is the projected amount of refund you should receive at year's end.

  If the projected refund due is significant, you may want to consider reducing your planned estimated tax payments or withholdings.

• Using Quicken actual values in the Tax Planner

  The Tax Planner can base many of its figures on transactions that are already in your Quicken data file. For example, you may have imported TurboTax data for last year and then realized that your income and expenses for this year are turning out to be quite different. In this case, you may want to use current data, such as transactions that you've scheduled, instead of the TurboTax data that is based on the previous year.

• Annualizing your Quicken tax data

  If you track tax-related income and expenses in Quicken or import your TurboTax data, the Tax Planner may use the year-to-date amounts to calculate and prefill projected amounts for you. This process is called annualizing your data.

  The Tax Planner offers two ways to annualize your data:

  • Scheduled transactions (recommended): In this case, annualization is based on a projection of the amount in a scheduled transaction, such as federal income tax withheld from your paycheck.
  • Estimate based on YTD daily average: In this case, annualization is based on the ratio of the number of days from January 1 until the current system date to a 365-day year. For example, if an item shows $10,000 earned through April 30 (approximately one-third of the year), annualizing this amount gives you a year-end income estimate of $30,000 (three times $10,000). On the other hand, if you earned $10,000 through April 30, but don't expect that income to continue at the same rate for the rest of the year, don't annualize that item.

  Notes

  Wherever possible, base your projections on scheduled transactions instead of annualizing year-to-date data.

• Manually entering information in the Tax Planner

  To get the most accurate estimate of your taxes, you might decide to fine-tune the values in the Tax Planner. You can manually enter projected amounts for information you choose not to track in Quicken (remember to enter a full year's worth), and you can edit any amounts that Quicken has filled in for you.

• Viewing your tax rates

  Quicken supports two tax years (for Quicken 2007, those tax years are 2006 and 2007). When you are in the Tax Planner, you can view the rate Quicken uses to calculate your taxes for each of the supported tax years.