2023 Colorado Sales Tax Refund using Annualized Income Method

[kkmrhktax]

My first year using the annualized income method. I'm a Turbo Tax Deluxe user. On form 204, the 1/1/2023 to 12/31/2023 tax period shows tax due without subtracting the $1600 state sales tax refund (married filing jointly, $800 per person). I made my estimated payment for this period based on a deduction of $1600.  2023 TT is calculating an underpayment penalty for this period.  Why doesn't 2023 Turbo Tax include the state sales tax refund in the final tax owed calculation for this tax period?

[BillM223]

First, you need to have been a resident of Colorado all of 2023 and 18 or older.

Then, you need to go all the way through your Colorado interview to get the credit and answer two questions:

There two screens near the end of the Colorado interview that you have to pass through and make the correct answers to trigger the Colorado Sales Tax Refund:

1. "Qualifying for the Colorado state sales tax refund" (this is where the question about days incarcerated is)

2. "Qualifying for the Colorado sales tax refund" (where you have to indicate your filing date)

Once you have clicked on Yes on the second screen, the TABOR refund will be added.

Let this be a lesson for all TurboTax users, that when you start a section in TurboTax, that you finish it.

NOTE: if you are not 18 or not a CO resident, you won't see these questions, because you don't qualify.

[kkmrhktax]

I already completed the interview process. I will make my final state tax payment before 4/14/2024.

I stopped working on 1/3/2023.  I received final wages with federal and state income withheld in January 2023. This info is included in Turbo Tax.

Form 104 is correct, the 4.4% tax rate on my Colorado taxable income is subtracted by $1600 by the Sates Sales Tax refund.  Form 204 shows, for the annualization period ending December 31, the installment payment due is 70% of the 4.4% tax rate on my Colorado taxable income and does not include the $1600 deduction.  

I made the 1/15/2024 estimated payment based on subtracting $1600 from my total tax due. Form 204 is showing an underpayment penalty for the December 31 annualization period. The cumulative state withheld tax and all estimated payments made by 1/15/2024 total to 80% of tax due for 2023.

Any other info you'd like me to provide?

Why doesn't the annualized installment method, form 204, include the State Sales Tax refund?

[BillM223]

Form DR204 does include the TABOR refund.

On the 2023 Instructions for DR 0204, it reads for line 4: 

"4. (a) Enter your current year tax liability (including alternative minimum tax and any credit recapture) after reduction for all credits other than withholding tax and estimated tax payments."

So your TABOR credit should be used to reduce your tax liability before the annualization even starts.

And up in part III, line 8 is for estimated taxes paid and line 9 is for taxes withheld, so no credit belongs here.

So on this form, credits are not considered to be part of your estimated tax payments.