Tax estimation tools

🇺🇸 discusses several popular tax estimation tools, primarily for use during the current tax year, to help taxpayers choose the one(s) that will cover their situation best.

No attempt has been made to verify that all calculations in all tools are correct, although these are all popular enough that, at least for the ones with a convenient feedback path, any egregious errors are usually found and fixed quickly. Some places in which last year's tax law is still used may be noted in the Limitations section.

Commercial tax software
Tax software intended for sale to the consumer (not tax professionals; e.g., the ones reviewed at The Best Tax Software | PCMag) to produce an official tax return is usually not available until November or December of the current tax year (and even then only in partial form). These programs may, however, include a [https://www.bogleheads.org/forum/viewtopic.php?p=3492987#p3492987 "What If...?" worksheet] (or similar name) available to estimate the succeeding tax year's situation. If such a program produced a correct tax return for the previous tax year, then the "What if...?" feature will likely produce a reasonable estimate for the current tax year, assuming no significant changes in the taxpayers' situations.

If the tax software does not provide a "What if...?" feature, a simple and effective way to estimate taxes for the following year is to use the current year's return modified with the planned changes. There is no need to purchase new software.


 * Make a copy of your current year's return and save it as a new filename.
 * Modify tax forms as necessary with the planned changes.
 * Adjust withheld taxes to minimize the amount due.
 * Create different scenarios by saving the returns with different filenames.

Example - high medical expenses
For example, you unexpectedly move into a skilled nursing facility. Expenses for skilled nursing facilities are qualified medical expenses. Enter the planned expenses on Form 1040 Schedule A. In this situation, your expenses far exceed the 7.5% AGI (Adjusted Gross Income) threshold (for 2021).

You have a choice of taxable investments, savings, and a traditional IRA to fund these expenses. Since you are over the age of 72, you are already receiving a Required Minimum Distribution (RMD). The IRA distribution is taxable income reported on IRS Form 1099-R.

What if... you could take those IRA distributions with little or no impact to your taxes?

Modify Form 1099-R Box 1 (Gross distribution) and Box 2a (Taxable amount) with the amount of the planned medical expenses. In this example, the medical expenses exceed the RMD and you are withholding a percentage of taxes based on the withdrawal amount.

The tax software now shows a large refund because the AGI dropped. To avoid a large refund, modify Form 1099-R Box 4 (Federal Income Tax Withheld) and reduce the amount until the refund is close to zero. It is possible that you may not need to have any taxes withheld, which would make this a tax-free withdrawal.

You can then modify your planned IRA distribution with the new amounts.

Free tax estimation software
Some popular free alternatives to the above programs are listed below in alphabetical order across the page. These programs don't claim to produce an official tax return, but can help with tax planning during the year if they cover a taxpayer's situation. No attempt has been made to rank them, because any overall rank is less important than how they fit an individual's situation.
 * blank = not supported by the tool
 * X = Separate income line item or calculation fully supported
 * 1 = Income lumpable with another entry or credit entry allowed but not calculated
 * 2 = Tool allows more detail (e.g., full Schedule C) than needed for most tax estimation calculations

Program links and support

 * CoTaxAide For corrections and suggestions, email [mailto:jeff@bogarthome.net jeff@bogarthome.net]
 * Excel1040 For corrections and suggestions, email [mailto:IncomeTaxSpreadsheet@gmail.com IncomeTaxSpreadsheet@gmail.com]
 * IRSCalc
 * Mortgagecalculator
 * TaxCaster (an Intuit TurboTax product)
 * Toolbox For corrections and suggestions, post in Case Study Spreadsheet updates.

By deductions
Some programs provide only a place for the user to enter a line item value for a particular "additional tax" or "credit" that, in a real return, is a calculated value.

For those situations, that cell is left blank because the program isn't adding any value for the user.

Limitations
This section notes things beyond blank cells in the tables above. Current as of 14-Aug-2022.