Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

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goshenBogle
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Joined: Thu Oct 06, 2011 6:12 pm

Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by goshenBogle » Tue Mar 13, 2018 3:51 pm

I am retired and need to compute estimated tax for 2018. I will use the IRS publication 2018 Form 1040-ES, "Estimated Tax for Individuals" (dated Feb 28, 2018). The "2018 Estimated Tax Worksheet" is on page 8 of the 1040-ES document and is fairly easy to use.

BUT - unless I am missing something, there is an error in this worksheet.

Step 4 of this worksheet says:
"Caution: If you will have qualified dividends or a net capital gain, or expect to exclude or deduct foreign earned income or housing, see Worksheets 2-5 and 2-6 in Pub. 505 to figure the tax"

I have qualified dividends. Pub 505, "Tax Withholding and Estimated Tax", is only available for 2017; there is no 2018 version of pub 505 on the IRS site. SO let's look at worksheets 2-5 & 2-6 from 2017 pub 505.
Worksheet 2-5 = "2017 Estimated tax worksheet - Line 2 Phaseout of Itemized Deductions?
Worksheet 2-6 = "2017 Estimated tax worksheet - Line 4 Reduction of Exemption Amount"

Neither of these worksheets make sense for computing tax.

I assume that pub 1040-ES really meant to indicate that worksheets 2-7 & 2-8 from pub 505 should be used.
Worksheet 2-7 = "2017 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet"
Worksheet 2-8 = "2017 Estimated Tax Worksheet—Line 6 Foreign Earned Income Tax Worksheet"

Are my assumptions correct that to compute estimate tax when there are qualified dividends I should use worksheet 2-7 Qualified Dividends and Capital Gain Tax Worksheet?
Retired and loving it!!!!

kaneohe
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Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by kaneohe » Tue Mar 13, 2018 4:16 pm

Why not just use a tax calculator (or software) like the HRB calculator or Taxcaster. Both give 2018 results as well as 2017 at the end.

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FiveK
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Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by FiveK » Tue Mar 13, 2018 4:22 pm

Or you could use something written specifically for 2018 taxes, such as the "what if?" worksheets of TurboTax, TaxAct, etc. or the personal finance toolbox spreadsheet.

carolinaman
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Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by carolinaman » Wed Mar 14, 2018 7:47 am

I use an Excel spreadsheet to calculate my taxes and necessary with holdings. It is pretty easy to do and can be used in future years as well.

MikeG62
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Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by MikeG62 » Wed Mar 14, 2018 7:49 am

carolinaman wrote:
Wed Mar 14, 2018 7:47 am
I use an Excel spreadsheet to calculate my taxes and necessary with holdings. It is pretty easy to do and can be used in future years as well.
I do the same thing.

nolesrule
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Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by nolesrule » Wed Mar 14, 2018 7:55 am

I use my own spreadsheet and also use the personal finance toolbox.

goshenBogle
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Joined: Thu Oct 06, 2011 6:12 pm

Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by goshenBogle » Wed Mar 14, 2018 2:50 pm

Thank you all for your replies.

I also create Excel spreadsheets for all worksheets that I need for my federal tax and use these from year to year. I like this method because I have good backup for my calculations. Don't know why the fed doesn't create spreadsheets...

As to the supposed error I found in the 2018 Estimated Tax pub, turns out that the Qualified Dividends worksheet in the pub 505 and the Qualified Dividends worksheet in the 1040 pub produce, at least in our case, exactly the same tax result.
Retired and loving it!!!!

ubermax
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Re: Computing 2018 estimated tax - 2018 Pub 1040-ES instructions have an error?

Post by ubermax » Wed Mar 14, 2018 4:44 pm

carolinaman wrote:
Wed Mar 14, 2018 7:47 am
I use an Excel spreadsheet to calculate my taxes and necessary with holdings. It is pretty easy to do and can be used in future years as well.
Me too , I reflect everything I know about the new tax rules for 2018 in my estimate - roughly 98% of our income comes from pension, RMD, and SS and those items are known at the end of 2017 - I use 2017 numbers for some of the itemized deduction components like charitable deductions , out of pocket medical, etc. but I just checked my 2018 estimate and the we qualify for the 26.6 K standard deduction.

I need to use the Dividends and Cap.Gains worksheet to calculate the tax and it relies on the Tax Tables - since we now know the Tax Rate Schedule for 2018, I can use that to determine the tax per the Tax Table by using the mid-point of the appropriate range of the Tax Table to calculate the tax using the Tax Rate Schedule .

Then I just take a quarter of the tax and remit that quarterly for both Fed & State .

OP - Are you by chance from Goshen, CT. ?

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