How is the tax on Line 14 calculated in TurboTax? It appears to underestimate the effect of qualified divs/cap gains, resulting in a higher calculated required quarterly installment.
For example, in column (a):
Annualized income (ln 3) comes from multiplying 1st quarter income by 4; however, qualified dividends/cap gains (in smart worksheet section) are not similarly annualized. Therefore, when the tax is calculated (ln 14), it appears to tax much more of the income as ordinary income instead of maintaining the same ratio of capital gains vs. total income.
to further clarify with numbers, assume I had $50k earnings and $50k capital gains in the 1st quarter:
Line 3 - $400k
capital gains worksheet - $50k capital gains
Line 14 would calculate $50k at 15% capital gains rate & $350k ordinary income tax rates (totaling ~$74k, ignoring any deductions, etc.)
If instead, capital gains were also annualized, Line 14 would be calculated at $200k capital gains and $200k ordinary income; the result would be slightly less than half as much, requiring a much smaller estimated tax payment.
