BillM223, sorry but I still don't agree that the qualified dividends are accounted for in *each* tax quarter. Yes, it's there at the end, but each tax quarter must be accurate. Otherwise, Turbo Tax might incorrectly decide a penalty is due for underpaying the taxes owed in the first quarter, and it keeps compounding until the qualified dividends are finally included in the tax computation for the last quarter.
The problem is that TurboTax is leaving the columns for the first three tax quarters blank in the Capital Gains Tax Computation Smart Worksheet for Form 2210 Schedule AI, on line E. So it isn't including the qualified dividends in the tax calculation for line 14 columns a, b, and c. To prove this, I modified a copy of my return to actually try it out in Turbo Tax with values that can easily be looked up in the tax tables for validation.
Here's a simple example of what Turbo Tax is calculating for the first tax quarter, for a married couple filing jointly, taking the standard deduction, both over the age of 65 and no dependents.
Enter $10,000 AGI for the first tax quarter (2210AI line 1 column a), which includes $1,000 in qualified dividends. Schedule AI shows that this is annualized to $40,000. The taxable income after the 27,800 standard deduction for 2 seniors is $12,200 (line 13 column a).
This is where the Capital Gains Tax Computation Smart Worksheet for Form 2210 Schedule AI comes into play. As I said before, columns a, b, and c are blank in this worksheet; only column d has an entry for the qualified dividends for the year. In Forms view, I can fill in values in columns a, b, and c for line E, but the Step-by-Step did not ask for the information nor issue any warnings.
1. Don't make any changes to line E. On line 14, you'll see the annualized tax calculated for the first quarter is $1,223. That matches the amount of tax in the tax table for married filing jointly with $12,200 of taxable income (the taxable income before accounting for qualified dividends). The quarterly amount due, on line 21, becomes $275. But the tax due should be lower since $1,000 (or $4,000 annualized) of qualified dividends should have been taxable at a lower rate.
2. Go back to line E, and fill in column (a) with $1000 (the amount of qualified dividends that tax quarter). As a result, the annual tax calculated on line 14 changes to $823. This matches the amount of tax in the tax table for married filing jointly with $8,200 of taxable income (the taxable income less the $4000 annualized qualified dividends). This is what I'd expect since this $4,000 would not be taxed at all at this low level of income when completing the Qualified Dividends and Capital Gain Tax Worksheet. The quarterly amount due, on line 21, becomes $185.
Without manually writing in qualified dividends for each quarter, TurboTax is calculating that $275 is owed for the first tax quarter, whereas only $185 is actually owed. This example used small numbers for the sake of simplicity; the difference could actually be much greater.
