Federal Tax Payments – What Tax Line?

Hi, Jay.

The proper line to use FOR WHAT?

Were any taxes withheld on those 1099 forms? If so, how did you enter the

1099 information in TT2009? Or in Quicken?

All federal income taxes withheld on Forms W-2 and 1099 should appear on line 61 of Form 1040. How the total amount gets to that line depends on how you've entered data in the TurboTax screens. Did you enter the withholding yourself, or let the Financial Institutions download the information, along with the interest and dividend income amounts. Did you enter or download the data into Quicken, or directly into TurboTax?

Right under line 61 is line 62, "2009 estimated tax payments and amount applied from 2009 return". This number also can be entered directly, although it usually is carried forward from other input forms.

In any case, the proper treatment is usually to enter the amounts on, or have them automatically flow through, the Tax Payments Worksheet. This worksheet has sections to enter and accumulate Estimated Tax Payments, Tax Payments Other Than Withholding, and Taxes Withheld.

There is no such entry on the Form 1040; there's only line 75, "Amount you owe".

In Quicken Deluxe, we must "work around" the system to get the proper tax amounts recorded in the proper tax years. I've never used Quicken H&B, so I don't know if it has a better method for this.

In Deluxe, I depart from the strict "cash method of accounting" and use accrual entries to record federal income taxes for each year. The tax balance paid on April 15, 2010, is not for 2010, but that's how it appears using the strict cash basis. And, since there were probably some prepayments - whether by withholding from wages or dividends or by estimated tax payments - and quite often a refund due, the April balance does not reflect the actual tax amount for ANY year.

So I make a "non-cash" entry dated December 31 each year. I can't make this entry until I've completed my Form 1040 at some time in the following year, but I date it at year-end. My entry can be made in any Quicken Account; I usually use my "FIT Prepaid" account, which is where all my withholding and estimated tax payments are accumulated. As of 12/31/09, this account showed the total withholding for 2009 before my year-end entry. (If I made a

1/15/10 estimated tax payment on 2009 taxes, I would need to mentally add that payment to the 12/31/09 balance in calculating my year-end entry. And if I owe a penalty for underpayment of estimated taxes, that penalty expense must be included in the year-end entry, too, of course.) Once my return is done, I use those final numbers to record my actual tax expense for 2009.

In most years, the final entry is simple: In my FIT Prepaid account, I enter the amount of the actual tax - the amount on line 60, "Total Tax", of Form 1040 - in my Federal Income Tax Expense category. (This is usually the only entry in this Category for the whole year.) Once this is recorded, the

12/31/09 balance in FIT Prepaid should show the exact amount that I still owe (line 75) or that I've overpaid (line 72) - after adjusting for that 1/15/10 payment, if applicable. By April 15.2010, I should have paid or received the balance, either way, and the amount left in FIT Prepaid should equal my withholding or prepayments (to date) on my 2010 tax.

RC

"R. C. White" wrote in news:lLydnSUIl_vz-VHWnZ2dnUVZ snipped-for-privacy@posted.grandecom:

Handling tax payments in Quicken is very tricky. I recommend setting up different tax subcategories, so you can differentiate exactly what is being paid or refunded, and while you set the tax item linkage it is pretty much imperative that if you import into TTax that you at least review the "tax payments worksheet" which is the source form in TTax which flows your payments to other places.

a common problem is payment of Q4 state estimated tax after 1 Jan, which is credited to the prior year by the state, but for the current year by the feds. You also need to segregate any tax paid with the return for the prior year from current year estimates. As far as the 1/15 fed estimated payment, I just accept that it isn't in the import data and manually add it on the tax payment worksheet.

I've been bit in the past by applying a prior year overpayment to current year estimated payment that I didn't account for in Q in a way that would be clear when running the Q tax schedule report.

a problem with federal estimated taxes is you are allowed to opt to spread witholding equally to all four payments, or apply to period actually paid, which extends to the subsequent 15th of the month which Q can't really compute for you to determine which method results in lowest estimate/abatement of penalty.

scott s. .