The QBSE is an accounting program not an income tax preparation software ... and it helps you to estimate your taxes it will not complete everything.
I opened a new SEP IRA earlier this year but haven't contributed yet. I'm ready to make my deposit now, but want to understand how this all works. When I make my contribution, will Quickbooks update and reflect the deduction? Most likely not. There are so many moving parts on an income tax return and an accounting program can only track some of them.
Meaning will the contribution deduction reflect as a reduction on my owed quarterlies? Again most likely not but you can enter something to see.
Best practice would be to wait for the end of year info so the TT program can tell you the max you can contribute ... at best you could contribute some with the rest later when you have all the figures. You have until 4/15 (or 9/15 if you file an extension) to contribute to/ fund the SEP ... the only thing you had to do by 12/31 is the opening of the account.
The second question I have is about the QBI deduction. I don't see that anywhere in Quickbooks, but I do qualify for that deduction. Will that show up in TurboTax? Yes, only on the TT program.
Will that show up as a deduction on my owed quarterlies or will I have to file for a refund next year? It is a deduction on the tax return that lowers your federal taxes automatically. This is not taken into consideration for estimating your quarterly payments.
Third question is about any possible refund. If I pay my quarterlies as Quickbooks calculates them, then do I still do a final filing next year? Again, QB is only an accounting program... it doesn't take the place of the form 1040. On your annual tax return you will report all your income and expenses on the Sch C which is part of the tax return. Then any adjustments & deductions are subtracted and a total tax bill is computed. Finally, any estimated payments and withholdings are entered and the final bottom line amount is figured ... at that point you will either have a refund or a balance due.
I'm used to W-2 way of paying which is just once in January/February then get my refund around March. Wouldn't Quickbooks calculate my quarterlies such that there is no refund in the end? Why over or under pay? Estimated payments are just that ... estimated. The goal is to get as close to breakeven as possible however a return still must be calculated to see how you stand at the end. If you overpay then you will get a refund, if you underpaid you will owe. The actual goal for estimated payments is so you don't owe a penalty for underpayment ... next year you can use the Safe Harbor method to pay the estimated taxes ... you take the 2019 tax liability and divide it by 4 to arrive at the minimum 2020 quarterly payment needed. Then you avoid the penalty but may over or under pay because you are not using the current actual figures but simply relying on the prior year figures. Some people do this and some don't ... you need to find the method that works best for you.
The last question is for my home office. Quickbooks only shows the standard deduction by square feet, but it also lists the real expenses next to it. Using itemized will be much bigger deduction for me, but is that something TurboTax will figure out for me? Using the itemized instead of the standard I mean. The OIH expense goes on the Sch C as a deduction ... the QB program only uses the safe harbor method however in the TT program you can see if the actual expenses option will work better. Also do not mix up the actual expenses OIH calculation on the form 8829 with the Itemized Deductions on the Sch A ... they are not the same.
