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Tax Year 2023 was the first time I tried using the annualized method since I stopped working. I'll admit, I don't know if I did this correctly. I didn't try using the What-if option in Turbo Tax 2022 to see if I could use the annualized method for 2023 estimates.
I created an Excel workbook that has multiple linked worksheets for Federal Estimated Tax Worksheet 2-1, 2-5, 2-7, and 2-8. Also, I added and linked worksheets with income interest, dividends, capital gains, and all itemized deduction line items. I tried to mimic as many federal and state forms as possible. Since I have qualified dividends, I used Annualized Income Worksheet 2-7 and 2-8. I track just about everything in Quicken, so I can export the relevant transactions into the appropriate worksheet. As discussed in this thread, , I limited Schedule A line 5 SALT taxes to $10,000 for each reporting period (end of 3/31, 5/31, 8/31, and 12/31). Due to the timing of our property tax payment, the $10K limit was hit during the period ending 8/31. Also, used the 7.5% threshold for Schedule A medical expenses for each reporting period.
Hopefully this is correct. I'll compare to TT2023 annualized income method when I receive all forms.
Do you think I'm on the right track?
Also, I'm trying to learn about the Alternative Minimum Tax as I might need to take some large long term capital gains in 2024. Any comments about incorporating AMT into the Annualized Income method? I am trying to add Form 6251 into the workbook, but I'm not sure how to do this correctly.
Side note: There were some other threads about earlier versions of TurboTax calculating short term carryforward losses incorrectly. I'll manually deal with this if needed.
Schedule AI instructionw were written before SALT limitations, and not updated.
We blue states hope this all EXPIRES on time, or better, repealed now.
For 2022 and 2023 I ended up doing what I had written about last year: Added up my SALT amounts for each period and wrote a formula in Excel to take the smaller of my SALT amount or $10,000/X with X being the annualizing factor. For me, the important thing about annualizing is that I get a disproportionate amount of taxable income in the fourth quarter and want to wait until the last minute to pay. I just didn't want to mess up annualizing the deductions and raise a red flag. Anyway, for 2023 it turns out I'll be taking standard deduction.
For 2023 I tracked taxable income including qualified dividends and long term capital gains in Excel and then went to Turbo Tax 2022 and used the estimate tax tool for 2023. I made changes each quarter as needed. If you put in the payments you already made it recalculates the next quarter. Then in January 2024 I used TT2023 to figure out the fourth quarter payment. I didn't have all of my 1099s but I could figure out the amounts based on what I had already tracked during the year.
Can't help you with AMT.
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