Help: Est Taxes Applied from Prior Year - How to handle in Quicken?

I'm using QP2007. 2006 was the first year that I was required to pay estimated tax payments. So I created two subcategories to handle this:

Tax:MI1040-ES and Tax:US1040-ES and applied the appropriate tax line item assignments.

Last year I overpaid both state and US taxes by a few hundred dollars and at tax filing time, just had the overage applied to 2007, thereby reducing the size of my estimated tax payments for this year.

For my 2007 quarterly payments, I've set up each transaction using a split, whereby the full amount due is a positive amount, and the amt applied from 2006 is a negative amount. (Same categories for each split.) This, of course, means that although the transactions look fine, the tax reports are wrong, because they only show the amount actually paid in 2007 (reduced by the amount paid in 2006).

BTW, the feds applied my entire overage to my first payment, but the state broke it out over several payments, so my April payment for the state ended up being $0.

Any input on how I should handle this situation in Quicken so it's properly documented in my reports ... esp come tax time? I've looked through the category list and the corresponding tax line item assignments, but I can't find anything related to overpayment of estimated taxes, just underpayment.

TIA and Regards,

Margaret

Reply to
Margaret
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Part of your problem with this situation is that QW only looks at the calendar year in compiling tax data.

Haven't completely wrung this out but some thoughts here to hopefully lead to a solution.

One way to get around this might be to create a "Holding Account". Using the overpayment of Fed taxes as an example; Credit the Holding Acct with the 06 overpayment - dated 12/31/06. Debit the Holding Acct when estimated payments are made in 07. The amount of the debit will be the amount of the 06 overpayment that is applied. In the end, the Holding Acct will zero out.

For the state, the situation might be slightly different. Question - Is the 06 state overpayment actually equivalent to a state refund and therefore reportable in your 07 Fed return?? The answer here might alter the approach slightly - but would be similar to the handling of the Fed taxes. Seems one might credit the Holding Acct [dated 01/01/07] with the amount of the state 06 overpayment and with the category and tax line assignment for a reportable state refund. Then debit the Holding Acct for the estimated payments.

Have not dealt with your situation but have a similar dilema with taxable dividends [or other distributions] received in Jan but reportable for the prior tax year. I use the Holding Acct approach to properly record these events - and satisfy QW's calendar year restrictions.

Reply to
JM

Yes, this is actually a refund of the 06 taxes received in 07 but part of it is applied to the 07 estimated taxes. I would code that "refund" as a normal deposit with a 07 date (since it was received in 07) so that it appears on the 07 reports.

Reply to
Laura

Reply to
NEWSGROUPS

Thanks for the suggestions, everyone. I think this year (if I happen to have overpaid again, which I doubt), I will simply take the refund and pay the estimated taxes as they come due. In the meantime, I already have categories for both state and US tax refunds from prior year. I believe I can dispense with a holding account if I record the refund "deposit" on the same day as the estimated taxes were paid. I'll have to play around with it. But thanks for this bit of info. I should be able to get my reports correct now. :-)

Regards,

Margaret

Reply to
Margaret

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