Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
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Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
Is there an easy way to estimate different future Fed and State (NY) Tax Bills (for say 2021) based upon different Social Security, Roth Conversion, and Capital Gains Scenarios?
I use Turbo Tax on line annually to file my taxes and I am a little surprised they don't have a module to help me do that for next year (or they do and i overlooked it).
I am a 5 level (mid level) gunner on Excel and have not tried to do my own spreadsheet trying to replaces the tax code.
I have used I-ORP and that gave me great info to start now I am trying to get an estimate for how that might affect me next year.
thank you
I use Turbo Tax on line annually to file my taxes and I am a little surprised they don't have a module to help me do that for next year (or they do and i overlooked it).
I am a 5 level (mid level) gunner on Excel and have not tried to do my own spreadsheet trying to replaces the tax code.
I have used I-ORP and that gave me great info to start now I am trying to get an estimate for how that might affect me next year.
thank you
Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
Using 2020 turbotax (or waiting until late 2021 and using the provisional 2021 version) with your expected scenario(s) will likely get you pretty close (actual will be slightly lower than 2020 given higher standard deduction and brackets). The Personal finance toolbox spreadsheet in the Wiki will also do this pretty reliably.
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Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
Thank youterran wrote: ↑Sun Sep 19, 2021 8:33 am Using 2020 turbotax (or waiting until late 2021 and using the provisional 2021 version) with your expected scenario(s) will likely get you pretty close (actual will be slightly lower than 2020 given higher standard deduction and brackets). The Personal finance toolbox spreadsheet in the Wiki will also do this pretty reliably.
Since I filed my 2020 turbo tax return w/ turbo tax, I don't see an easy way to do various future scenarios (2020X, 2020Y, 2020Z returns) without starting down the path of selecting "amend my return". Maybe that path will work if i don't file that "amended" scenario? Waiting until 2021 version makes sense.
thank you for point out the personal finance toolbox spreadsheet; I had not seen that.
Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
I think you can probably start a new/separate return in Turbotax, but it's been awhile since I looked at it.
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Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
A mid level skilled Excel person should be able to develop a spreadsheet that can be easily changed based upon different scenarios.
I am retired and have to estimate my current year taxes at the beginning of the tax year so I can setup my withholdings and estimated taxes. I developed a spreadsheet that allows me to project my tax liability based upon income, RMDs, CDSs, Roth conversions and other factors. If you have a reasonable understanding of your taxes and Excel, it should not be difficult to do and it will give you a good tax planning tool.
One caveat about using Turbo Tax for tax planning. I did a large tira to Roth conversion in 2020. To assure my understanding and accuracy, I used the 2019 Turbo Tax version to plan my 2020 taxes. I stopped short of filing taxes of course. However, when filing my 2020 return TT got confused about certain things I did and I could not get rid of them. I finally was able to talk with a TT expert who was able to straighten things out.
I am retired and have to estimate my current year taxes at the beginning of the tax year so I can setup my withholdings and estimated taxes. I developed a spreadsheet that allows me to project my tax liability based upon income, RMDs, CDSs, Roth conversions and other factors. If you have a reasonable understanding of your taxes and Excel, it should not be difficult to do and it will give you a good tax planning tool.
One caveat about using Turbo Tax for tax planning. I did a large tira to Roth conversion in 2020. To assure my understanding and accuracy, I used the 2019 Turbo Tax version to plan my 2020 taxes. I stopped short of filing taxes of course. However, when filing my 2020 return TT got confused about certain things I did and I could not get rid of them. I finally was able to talk with a TT expert who was able to straighten things out.
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Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
I always use the download version of TurboTax. This allows you to create multiple returns, so I create a next year mock up and a steady state retirement straw man return to estimate our future taxes. This method has worked well for me. At $60 - $90 downloaded from Amazon I would think this makes more sense than trying to build a federal and state tax spreadsheet in Excel, capturing all the phase outs, etc. in both the federal and NY state tax code.
De gustibus non disputandum est
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Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
2020 Turbo Tax (TT) Deluxe desktop has a nice “what if” feature. Maybe other desktop/download/online TT versions do too. It starts with your 2020 Federal return and gives you three columns (using 2020 or 2021 tax rates) to run “what if” plans.
In TT, select your 2020 filed return. From the top left menu bar select “View” ==> select “Forms” ==> click on “Open Form” ==> type in “what-if” ==> select “What-If Worksheet” ==> click on “open form” to open the “What-If Worksheet” on your screen.
You only have to go through opening the worksheet this way the first time. After that, you can find the worksheet listed in the left sidebar called “Forms in My Return”.
Edit - I like the “what-if worksheet” layout as I can see my actual 2020 Federal return $ side by side with 2021 “what-if” plans. Usually the first 2021 column I generate is what my 2021 taxes should look like without doing anything unusual. Then I’ll add another column(s) to see the impacts of a transaction such as a Roth conversion. Etc.
In TT, select your 2020 filed return. From the top left menu bar select “View” ==> select “Forms” ==> click on “Open Form” ==> type in “what-if” ==> select “What-If Worksheet” ==> click on “open form” to open the “What-If Worksheet” on your screen.
You only have to go through opening the worksheet this way the first time. After that, you can find the worksheet listed in the left sidebar called “Forms in My Return”.
Edit - I like the “what-if worksheet” layout as I can see my actual 2020 Federal return $ side by side with 2021 “what-if” plans. Usually the first 2021 column I generate is what my 2021 taxes should look like without doing anything unusual. Then I’ll add another column(s) to see the impacts of a transaction such as a Roth conversion. Etc.
Last edited by HomeStretch on Tue Sep 21, 2021 2:02 pm, edited 1 time in total.
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Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
It depends. If you want to determine what your taxes will be for the next year, yes using TT is best if you are unsure of your tax situation. However, a spreadsheet can enable you to very quickly change your variables and you can see the affect immediately. Doing that multiple times with TT would be much slower and cumbersome.cadreamer2015 wrote: ↑Sun Sep 19, 2021 12:37 pm I always use the download version of TurboTax. This allows you to create multiple returns, so I create a next year mock up and a steady state retirement straw man return to estimate our future taxes. This method has worked well for me. At $60 - $90 downloaded from Amazon I would think this makes more sense than trying to build a federal and state tax spreadsheet in Excel, capturing all the phase outs, etc. in both the federal and NY state tax code.
Re: Estimating Fed and State 2021 Income Taxes for Different Retirement Scenarios
See if Turbotax allows you to save your 2020 tax return as something else. Say "2021 estimated tax return". Then just adjust the inputs to what you think will happen. I have done it using My HR BLock software for the last several years and it's pretty easy and accurate.