Tax software is programmed to look at all taxes paid during a calendar year, regardless of source (state / federal). That tax data has to be entered accurately, needless to say. That same data would then be incorporated into any subsequent calculations. If you have significant income derived from sources other than employment (investments, etc.), one alternate to estimated tax is to pay state and federal taxes proactively at the time of any given transaction (sale of equities, etc.). It then becomes a decision as to what percentage of the transaction to devote to federal and state taxes. If one is too stingy, btw, minimal purpose is served with this strategy. Some investors pay 20% federal and 10% state at the time of each transaction, depending on where you live. These percentages are not unrealistic, as any overage gets refunded on April 15th, reducing the burden of deep thought - and a reach for the check book.
