How to Plan for Taxes with Quicken 2013 or 2014 - dummies

How to Plan for Taxes with Quicken 2013 or 2014

By Stephen L. Nelson

Quicken 2013 and 2014 come with a very powerful, very useful Tax Planner. The Tax Planner helps you make a precise estimate of the taxes that you’ll owe. To use the Tax Planner, take the following steps:

  1. Display the Tax Planner.

    Click the Planning tab. Click the Tax Tools button. Choose the Tax Planner command. Quicken displays the Tax Planner window.

    To move past any introductory information, click the Year, Status, or Scenario links shown in the upper-left corner of the Tax Planner window.


  2. Verify the tax year and filing status.

    You want to start by verifying that the big picture assumptions that the Tax Planner makes are correct. Accordingly, make sure tax year and filing status look right. By the way, the initial guesses that Quicken makes probably are correct.

    Quicken can guess the year by looking at your computer’s clock. It can usually determine your filing status based on information that you supply when you set up Quicken. But if one of these bits of information is wrong, use the Tax Year and Filing Status drop-down list boxes to specify the right year and filing status (married, single, and so on).

  3. Enter the wages and salaries that you and your lovely or handsome spouse expect.

    Click the Wages link on the left. Then, when Quicken displays the Wages text boxes, type your wages and, if you’re married, those of your spouse. Quicken totals your wages and then makes a first rough calculation of the amount you’ll owe in taxes. Of course, Quicken needs to collect some more data before this number is accurate, so don’t freak out yet.

    You can move to the next set of input text boxes by clicking the Next link and to the previous window of input text boxes by clicking the Previous link. The Next and Previous links appear near the bottom of the Tax Planner window. (You may have to scroll down to see them on your computer.)

  4. Enter the other income you’ll have from interest, dividends, capital gains, and so on.

    To record the other income that you need to pay taxes on, click the Interest/Dividend Inc, Business Income, Capital Gains, and Other Income links and provide the information that Quicken requests. Some of these numbers are pretty easy to guess. Some of them aren’t. You can also look at last year’s tax return or at the year-to-date information you’ve already collected by using Quicken.

  5. Identify any adjustments to your gross income.

    Click the Adjustments link and then, using the Adjustments to Income text boxes, identify or estimate any adjustments to gross income that you’ll have. Most people make only one adjustment — contributions to a deductible IRA.

    Self-employed individuals, however, also typically have several other adjustments, including half of their self-employment tax (which Quicken automatically calculates and enters), a portion of any health insurance paid, and Keogh and SEP pension contributions.

  6. Estimate your itemized deductions.

    Click the Deductions link and then use the Standard and Itemized Deductions text boxes to estimate your deductions for expenses, such as state and local taxes, mortgage interest, and charitable contributions. Alternatively, if you’ll probably or possibly use the standard deduction, carefully check any of the boxes that Quicken uses to determine which standard deduction you should use.

  7. Tell Quicken how many personal exemptions you’ll claim.

    Click the Exemptions link and then specify the number of dependents you’ll claim on your return. The basic rule is that you get one exemption for every person in your family (you, your spouse if you’re filing jointly, and your kids) as long as they live in your house.

    Things become tricky if you have shirt-tail relatives (your Aunt Enid, for example) living at your house, if your kids live away from home or are married, or if some of the kids in the house have divorced parents. If you have questions because one of these situations sounds vaguely familiar, get the IRS preparation instructions and read the part about who is and is not a dependent.

  8. Indicate whether you owe any other taxes or have tax credits you can use to reduce your taxes.

    Click the Other Tax, Credits link and then use the Other Taxes & Credits text boxes to describe any of the federal taxes you’ll pay in addition to the usual federal income tax. The other taxes, by the way, typically include just two taxes: self-employment tax (which is the tax that self-employed people pay in place of Social Security and Medicare tax) and, in special cases, the alternative minimum tax.

    A bunch of different tax credits exist. You can very possibly look at your prior years’ returns to see if they apply (typically) in your situation.

  9. Enter any estimated taxes you’ve paid or any federal income taxes your employer has withheld from your paycheck.

    Click the Withholding link and use the Withholding text boxes to record how much money you’ve paid through withholding. Then click the Tax Payments link and use the Estimated Tax Payments text boxes to record how much you’ve paid in estimated tax payments and to guess how much you’ll pay in the coming months.

  10. Return to the Tax Planner Summary and review the Quicken program’s calculations.

    After you complete the preceding steps, click the Tax Planner Summary link and review the calculations that Quicken makes. Quicken estimates the total tax you’ll pay (which is useful and interesting in itself), the estimated refund or payment you’ll have to make, and one other particularly useful bit of information — your marginal income tax rate (which Quicken labels Marginal Rate).

    If you want to print a copy of the Tax Planner’s information and calculations, click Print (in the upper-right corner of the window).

Knowing your marginal income tax rate enables you to make more precise investment calculations. You can also use the marginal income tax rate to calculate the after-tax return that taxable investments deliver. Simply multiply the taxable return by the factor (1 – marginal tax rate).