Estimating 2019 federal income taxes (to pay in 2020)

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Nutmeg
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Estimating 2019 federal income taxes (to pay in 2020)

Post by Nutmeg » Thu Jul 11, 2019 11:00 am

What is the best way to estimate 2019 federal income taxes (to be filed in 2020)?

A friend with complicated income sources has requested help. Because of a change to a lower-paying job, my friend is trying to decide how to complete a new W-4 and whether to make estimated quarterly payments to the IRS.

wildkarrde21
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by wildkarrde21 » Thu Jul 11, 2019 11:07 am


SRenaeP
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by SRenaeP » Thu Jul 11, 2019 4:17 pm

You're actually asking a few different separate questions.

I've found that the best way to estimate my taxes was to create a spreadsheet that is a mock up of my tax return. This tells me my reasonably estimated income, tax liability, tax withheld/paid and the delta between the last two.

If your friend wants the best way to complete a W-4, it would be to gather all pertinent income info (W-2s, 1099s, etc.) and use the IRS withholding calculator.

https://www.irs.gov/individuals/irs-wit ... calculator

As far as whether or not to make estimated payments, that depends on whether or not s/he has had sufficient withholdings to date and if s/he would rather write a check or make up the difference via payroll deduction.

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Peter Foley
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by Peter Foley » Thu Jul 11, 2019 4:26 pm

If you use Turbo Tax, it has a two year comparison form you can print out and use as a guide for next year. I converted the two year comparison form to an Excel spreadsheet.

mggray17
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by mggray17 » Thu Jul 11, 2019 4:29 pm

After receiving my 13th paycheck of 26 for the year and my June 30th Vanguard statement with estimated yearly interest and dividends, I just did the same thing and found if I hadn't checked and hadn't made adjustments to my withholding I would have not been in safe harbor territory. After checking, I made adjustments and now I am.

The best tool that works for me is found here:

https://sites.google.com/site/excel1040/

Northster
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by Northster » Thu Jul 11, 2019 4:35 pm

I use my tax software (from 2018) to create a '2019proj' return that I can customize as needed.

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CAsage
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by CAsage » Thu Jul 11, 2019 4:44 pm

mggray17 wrote:
Thu Jul 11, 2019 4:29 pm
The best tool that works for me is found here:

https://sites.google.com/site/excel1040/
Second that recommendation. This tool is an Excel version of a real tax return, with the 2019 rates already implemented. If you can do your own taxes (and that's a good thing...) then you can fill in the numbers on the excel sheets (which mimic forms) and nail the answer. I love this tool.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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danielrhall
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by danielrhall » Thu Jul 11, 2019 6:46 pm

CAsage wrote:
Thu Jul 11, 2019 4:44 pm
mggray17 wrote:
Thu Jul 11, 2019 4:29 pm
The best tool that works for me is found here:

https://sites.google.com/site/excel1040/
Second that recommendation. This tool is an Excel version of a real tax return, with the 2019 rates already implemented. If you can do your own taxes (and that's a good thing...) then you can fill in the numbers on the excel sheets (which mimic forms) and nail the answer. I love this tool.
Third that recommendation. I really appreciate having this tool for mocking up tax scenarios. It's also a great way to help understand the interactions between forms and income and tax situations.

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MP123
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by MP123 » Thu Jul 11, 2019 7:02 pm

Peter Foley wrote:
Thu Jul 11, 2019 4:26 pm
If you use Turbo Tax, it has a two year comparison form you can print out and use as a guide for next year. I converted the two year comparison form to an Excel spreadsheet.
The desktop version also has a "what if" form that lets you try different scenarios and see what your taxes will be.

It functions sort of like a spreadsheet but with all the calculations of TurboTax behind it.

Very handy if you already have TT.

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Nutmeg
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by Nutmeg » Thu Jul 11, 2019 8:51 pm

SRenaeP wrote:
You're actually asking a few different separate questions.
This is perceptive and exactly right, which is why I needed a tax estimator in order to help my friend! I am grateful for all the responses.

The questions are separate but related. My friend wants to maximize retirement savings, minimize taxes this year because income will be lower next year with her new job, and have enough tax withheld to avoid penalties. The new (government) job gives her the chance to increase her retirement savings.

The W-4 calculator showed that, if she contributes an additional $20,000 to retirement plans for which she will be newly eligible, she will have already paid enough federal income tax that she won’t need to have any withheld from the new job. I will use another calculator to check that this is true.

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FiveK
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Re: Estimating 2019 federal income taxes (to pay in 2020)

Post by FiveK » Fri Jul 12, 2019 5:37 pm

Another estimating tool is the personal finance toolbox spreadsheet. It will also show a marginal rate chart, help with W-4 withholding, etc.

But all the various tools suggested are likely best judged "in the eye of the beholder"....

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