Formula for calculating estimated taxes

You are being quite coy about what number TurboTax actually does provide. I can't find a Usenet group specifically for Turbotax, but there is probably a forum out there more specifically related to that product, or you could always contact the vendor directly.

One of the vendor's closely-related family of tax software products does correctly calculate $8,250, so it seems especially odd that you would recall a different result.

-Mark B.

When you use TurboTax to calculate estimated taxes, it asks you which of several methods you want it to use. One of the choices is 110% of the previous year's tax. If you have not yet made any payments, it divides the total by 4.

That's correct if you want to take advantage of prior year safe harbor. If you live in California and your AGI is over $1,000,000 then you cannot use prior year safe harbor for your state income tax.

There is also current year safe harbor where you must pay 90% of this year's income, in equal installments. But to use this method you must estimate your income for this entire year.

And you can also compute a tax return after each quarter based on income earned for that quarter, and calculate the exact tax for that quarter. The detail is you annaulize your income (for example the first quarter whch is 1/1 to 3/31 multiply all income and deductions for that quarter by 4). Then calculate the tax, which might be tough as the 2011 tax forms aren't even out. The first quarter tax is this total tax divided by 4 times 90%, or in other words 22.5% of the total tax. But in California, the first quarter installment is 27.5% of the total tax, the second quarter installment is 36% of the total tax, etc,

I don't know about how Turbo Tax calculates it.

Easiest way is to use a tax professional.

TurboTax provides worksheets that show which safe harbor provision it used and how the calculation was done. You also have the ability to choose a different method. All of this is probably "hidden" if you follow their interview process.

Ira Smilovitz

how the calculation was done. You also have the ability to choose a different method. All of this is probably "hidden" if you follow their interview process.

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Open your last year's 1040 and find the Total tax on line 60, however, deduct line 63, 64a, 65, 66, 67, 70 and 71 . Divide this by

4 and multiply by 1.1 and you get the guaranteed no penalty quarterly installments amounts. You can also use form 2210 and its Schedule AI to compute the lowest quarterly payments you can make without incurring a penalty if your income varies throughout the current year. This is called the Annualized Income method and TT will only do it for the prior year,but if you use last year's TT you'll probably get a result not too different from what the current year's program will eventually produce.

IRS Publication 505 has workheets to manually calculate the AI iinstallments, however, you can download a"stand-alone" Excel form

2210 calculater from the web that does use current rates and does all the calculating for you. The AI method would only be useful to calculate installments if your income is decreasing or you have large Deductions or carryover losses in the first quarters..