Estimated Taxes and Social Security

[bob_cutler]

I receive social security and have other income so I file estimated taxes. Where should I enter my social security benefits on the TurboTax Deluxe estimated tax form? Should I enter half of it if my combined AGI is above the exempt amount? Seems like this has been overlooked by Intuit and (editorial comment here...) estimated taxes seems to be pretty bare bones compared to the rest of the product.

[Kat]

@bob_cutler You will have an SSA-1099 that reports your social security income, as well as any money withheld for taxes, Medicare, etc.  The information on that form is entered using the instructions I'm linking below.  Enter the info into the TurboTax program EXACTLY as it appears on your form.

Where do I enter an SSA-1099, SSA-1099 SM, or SSA-1099-OP-1? 

As for entering your quarterly estimated taxes paid, the instructions for that are linked below. IF, by chance, you have a state return to prepare, your estimated tax payments entered in the federal portion of the program will automatically be assimilated into the state program.  You won't need to enter them again.

Where do I enter my estimated tax payments? 

Please post back if you have further questions.

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[bob_cutler]

@Kat You misunderstood.  There's no place in the estimated tax worksheet to separately enter Social Security received.  Since it's taxed at different rates than ordinary income, capital gains, or qualified dividends it needs a separate calculation to ensure the estimated tax amount is correct.  Treating Social Security payments as ordinary income will cause it to overestimate how much taxes are due. 

[Kat]

@bob_cutler The program is designed to take into consideration each type of income and tax it at the appropriate rate.  That includes SS income, capital gains (long-term and short-term), other types of investment income, etc.  Rather than entering the info directly into the worksheet, I'd suggest just using the entry methods as offered in my original answer.  The program should properly calculate the taxes at the correct rates.  

If you find that, after entering data using the methods suggested, you note an error in the program, please post back here.  I'd be happy to report any noted bug to TurboTax Moderators for investigation.

[bob_cutler]

Because SS income is taxed at a lower rate than ordinary income, entering it along with other income as you suggested causes the estimated taxes owed to be more than is actually owed. Issues with your answer(s):

The instructions for SSA-1099 don't apply to estimated taxes.

The "where do I enter my estimated tax payments" article doesn't mention Social Security.

[Kat]

@bob_cutler I felt like I was totally missing your question, so I shared it with some of my co-Champions.  

One of them believes that you are, rather than entering your income and estimated tax payments for your 2020 tax return, asking about calculating estimated tax payments for 2021.  I'm SO sorry that I totally misunderstood what you were looking for.

According to @rjs , a co-Champion, the TurboTax calculator isn't well prepared to properly calculate your estimated taxes.  You'll just have to estimate how much of your SS benefits will be taxable for 2021, then do you own calculations from there.  According to @rjs , you can dig deeper into the "Help" portion of the TT tax estimator and possibly figure it out.  

I'm linking you to a couple of IRS publications that may assist you.  Both of the publications are the most current revision, but each is for 2020.  The first one is the Publication Form 1040-ES.  You'll find a worksheet there, on page 8, that may be helpful.

2020 Form 1040-ES (irs.gov)

Then there's the "big" publication, Publication 505, that goes into much more detail about calculating estimated tax payments.

2020 Publication 505 (irs.gov)

I'm sorry that the TurboTax calculator isn't more concise.  I also apologize for the misunderstanding at the outset.  Best of luck to you!

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[rjs]

@bob_cutler  Here's something else you could try that might work better for you. If you are using the CD/Download TurboTax software, use the What-If Worksheet in forms mode to do an estimate of your 2021 tax. Divide the tax that it shows you owing by 4 to determine your estimated tax payments. It's not as user-friendly as the question-and-answer interview, but it will do all the calculations you need, including calculating the taxable amount of your Social Security. If you need 1040-ES vouchers, print blank vouchers and fill them in by hand.

[bob_cutler]

Thanks to you and @Kat for taking a second look at this. Yes - future estimated taxes, as in 1040ES. While your method @rjs will work it's not very user friendly as you said. While digging into this issue I discovered that the IRS has its own Estimated Tax calculator Tax Withholding Estimator that seems to work pretty well. It's downside is that it doesn't differentiate qualified dividends or long term capital gains.  

Is there a suggestion box for TurboTax where I could give the developers feedback?

[jgnilk]

thanks Bob, for your attention to detail re: the S.S. and estimated taxes. I also have recently retired, but started my own, also div's and int become completely different now. thanks again!

[bob_cutler]

Just finished doing my estimated taxes 3 ways - once with Turbotax estimated form, once with the what-if approach your colleague suggested, and once using the IR online estimator.  Got three different answers! The What-if was 20% higher than the Turbotax estimator with IRS in between.

[BillM223]

All estimators are just that - an estimate.

They are using 2020 tax rules to try and guess what your taxable income and tax will be in 2021. This is a process with assumptions and guesses. Do each of these estimators use the same assumptions?

I would be astounded if all three estimators came up with the same answer, except in the simplest of cases.

At least you can be relatively confidant that you know what your tax burden will be within a 20% margin of error - maybe.