Estimated tax payments in Quicken

Posted by pat_little on August 12, 2009, 3:53 pm

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I have read many postings in this forum and others on how to use Quicken
to
record estimated tax payments, and I think I have understood the
principles, but
some of the practical details are causing me difficulties. I use Quicken
2007
Premier.

I set up an asset account for pre-paid federal tax (estimated payments in
my
case) and when I write the IRS a check I enter the asset account in
Quicken’s
Category field (it shows up in the register surrounded by square
brackets). The
entry is something like this:

4/16/07 (from) checking account (payee) US Treasury
(category) [Fed Tax pre-paid] (memo) 2007 1040-ES

Note that this example is for 2007. I am using that tax year to test my
new
method, since it is a completed year (1040 submitted, refund received) and
therefore a simple case.

As the year progresses I accumulate more into the asset account – two more
payments just like the first one. And on Jan 15th 2008 I send in the final
estimated payment - to follow the “transaction date within tax year”
philosophy
I enter this in Quicken on 12/31/07 with the date the check cleared shown
in the
memo filed. The transaction looks like this:

12/31/07 (from) checking account (payee) US Treasury
(category) [Fed Tax pre-paid] (memo) 2007 1040-ES 1/22/08

In April 2008 when I have completed my return, I get a refund and this is
entered in Quicken as two transactions – one showing the check deposit
assigned
to the asset account and reducing its balance, and the other showing a
transfer
from the asset account to an expense category for the actual total tax
that the
IRS got to keep, also reducing the asset account balance which now becomes
zero.
As before, I apply dates within the relevant tax year. These transactions
are as
follows:

12/31/07 (to) checking account (payor) US Treasury
(category) [Fed Tax pre-paid] (memo) 2007 tax refund 4/17/08

12/31/07 (from) [Fed Tax Pre-paid] (payee) US Treasury
(category) Federal Tax Self (memo) 2007 Total Tax from 1040 4/17/08

So far so good. The asset account has returned to zero balance and I have
a line
in my expense category for the Total Tax amount. I think I have correctly
recorded the money flows, but I have problems generating reports that
include
all of these transactions correctly. So I am wondering if I really have
done
things right.

For instance, the last transaction described above, where I finally put
the
Total Tax retained by the IRS in an expense category, does not show up in
many
Quicken reports. The only standard Quicken reports that I have found it to
appear in are the Budget, Spending By Category and Spending By Payee
reports. It
is omitted from many others including:
- Banking Summary
- Cash Flow
- Itemized Categories
- Itemized Payees
- Income/Expense By Category
- Income/Expense By Payee
- Tax Summary
- Business > Cash Flow

So, my BIG question is: Have I used the correct method for recording the
payments/transfers?

If the answer is no, then what should I be doing differently?

If the answer is yes, then the next questions is: How do I get the
transactions
to show up in Quicken reports properly?

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Posted by R. C. White on August 13, 2009, 9:38 am

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Hi, Pat.

It seems to me that you've done everything right - or almost right. I have
a couple of suggestions that might seem to be just cosmetic, but I think
will make the process more clear.

First, the January 15 payment should be recorded when paid, just like any
other check. Yes, I know this will leave the prepaid tax account showing
less than the full year's estimates for a couple of weeks, but it's OK; it
will work itself out.

Second, rather than wait for the refund check, go ahead and record the
actual tax for the year when you file your return. Date that actual-tax
entry on December 31, as you have been doing, even though you don't know the
amount until your return is completed, maybe in April. This entry of the
actual tax as a reduction to prepaid tax should leave that prepaid account
with an amount equal to the refund you expect to receive. Then, when you
receive the check (or direct deposit) a few weeks later, the prepaid account
will be reduced to zero, ready to receive the first estimate for the next
year.

That leaves only:

> For instance, the last transaction described above, where I finally put

> the

> Total Tax retained by the IRS in an expense category, does not show up in

> many

> Quicken reports.

This may be simply a matter of confusing Quicken about dates. The actual
tax should show up in the prior year, of course, not the current year, and
that should be taken care of by dating your actual tax expense entry as of
December 31 of the actual tax year. I'm not a big user of reports in
Quicken, but I do handle my tax entries that way and my Income/Expense by
Category Report shows it as an expense of the correct year.

My first theory was that you are confusing "cash flow" with "expenses".
It's understandable that the 12/31/07 entry would be omitted from Cash Flow,
because no cash "flowed" on that day - and the actual tax amount did not
flow at that time. But it still should show up in Income/Expense by
Category; mine does. You might want to recheck your settings for that
report; those settings confuse me, and maybe you, too. For example, when I
looked just now, my tax expense was not under Federal Income Taxes, but in
"Fed. Inc. Tax", which might be a holdover Category from the years when
names had to be much shorter. (In looking through prior years, I found that
some of my interest payments were still in "Interest Exp", rather than
"Interest Expense", so I changed them to get consistent results for all
years and a proper total expense.)

Let us know when you find what is causing this reporting problem. I'm sure
that others (including myself) will be interested.

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Using Quicken Deluxe 2009 and Windows Live Mail in Win7 x64)

> I have read many postings in this forum and others on how to use Quicken

> to

> record estimated tax payments, and I think I have understood the

> principles, but

> some of the practical details are causing me difficulties. I use Quicken

> 2007

> Premier.

> I set up an asset account for pre-paid federal tax (estimated payments in

> my

> case) and when I write the IRS a check I enter the asset account in

> Quicken's

> Category field (it shows up in the register surrounded by square

> brackets). The

> entry is something like this:

> 4/16/07 (from) checking account (payee) US Treasury

> (category) [Fed Tax pre-paid] (memo) 2007 1040-ES

> Note that this example is for 2007. I am using that tax year to test my

> new

> method, since it is a completed year (1040 submitted, refund received) and

> therefore a simple case.

> As the year progresses I accumulate more into the asset account - two more

> payments just like the first one. And on Jan 15th 2008 I send in the final

> estimated payment - to follow the "transaction date within tax year"

> philosophy

> I enter this in Quicken on 12/31/07 with the date the check cleared shown

> in the

> memo filed. The transaction looks like this:

> 12/31/07 (from) checking account (payee) US Treasury

> (category) [Fed Tax pre-paid] (memo) 2007 1040-ES 1/22/08

> In April 2008 when I have completed my return, I get a refund and this is

> entered in Quicken as two transactions - one showing the check deposit

> assigned

> to the asset account and reducing its balance, and the other showing a

> transfer

> from the asset account to an expense category for the actual total tax

> that the

> IRS got to keep, also reducing the asset account balance which now becomes

> zero.

> As before, I apply dates within the relevant tax year. These transactions

> are as

> follows:

> 12/31/07 (to) checking account (payor) US Treasury

> (category) [Fed Tax pre-paid] (memo) 2007 tax refund 4/17/08

> 12/31/07 (from) [Fed Tax Pre-paid] (payee) US Treasury

> (category) Federal Tax Self (memo) 2007 Total Tax from 1040 4/17/08

> So far so good. The asset account has returned to zero balance and I have

> a line

> in my expense category for the Total Tax amount. I think I have correctly

> recorded the money flows, but I have problems generating reports that

> include

> all of these transactions correctly. So I am wondering if I really have

> done

> things right.

> For instance, the last transaction described above, where I finally put

> the

> Total Tax retained by the IRS in an expense category, does not show up in

> many

> Quicken reports. The only standard Quicken reports that I have found it to

> appear in are the Budget, Spending By Category and Spending By Payee

> reports. It

> is omitted from many others including:

> - Banking Summary

> - Cash Flow

> - Itemized Categories

> - Itemized Payees

> - Income/Expense By Category

> - Income/Expense By Payee

> - Tax Summary

> - Business > Cash Flow

> So, my BIG question is: Have I used the correct method for recording the

> payments/transfers?

> If the answer is no, then what should I be doing differently?

> If the answer is yes, then the next questions is: How do I get the

> transactions

> to show up in Quicken reports properly?

Posted by jo on August 16, 2009, 12:33 am

Please log in for more thread options

> Hi, Pat.

> It seems to me that you've done everything right - or almost right. =A0I =

have

> a couple of suggestions that might seem to be just cosmetic, but I think

> will make the process more clear.

> First, the January 15 payment should be recorded when paid, just like any

> other check. =A0Yes, I know this will leave the prepaid tax account showi=

> less than the full year's estimates for a couple of weeks, but it's OK; i=

> will work itself out.

> Second, rather than wait for the refund check, go ahead and record the

> actual tax for the year when you file your return. =A0Date that actual-ta=

> entry on December 31, as you have been doing, even though you don't know =

the

> amount until your return is completed, maybe in April. =A0This entry of t=

> actual tax as a reduction to prepaid tax should leave that prepaid accoun=

> with an amount equal to the refund you expect to receive. =A0Then, when y=

> receive the check (or direct deposit) a few weeks later, the prepaid acco=

unt

> will be reduced to zero, ready to receive the first estimate for the next

> year.

> That leaves only:

> > For instance, the last transaction described above, where I finally put

> > the

> > Total Tax retained by the IRS in an expense category, does not show up =

> > many

> > Quicken reports.

> This may be simply a matter of confusing Quicken about dates. =A0The actu=

> tax should show up in the prior year, of course, not the current year, an=

> that should be taken care of by dating your actual tax expense entry as o=

> December 31 of the actual tax year. =A0I'm not a big user of reports in

> Quicken, but I do handle my tax entries that way and my Income/Expense by

> Category Report shows it as an expense of the correct year.

> My first theory was that you are confusing "cash flow" with "expenses".

> It's understandable that the 12/31/07 entry would be omitted from Cash Fl=

ow,

> because no cash "flowed" on that day - and the actual tax amount did not

> flow at that time. =A0But it still should show up in Income/Expense by

> Category; mine does. =A0You might want to recheck your settings for that

> report; those settings confuse me, and maybe you, too. =A0For example, wh=

en I

> looked just now, my tax expense was not under Federal Income Taxes, but i=

> "Fed. Inc. Tax", which might be a holdover Category from the years when

> names had to be much shorter. =A0(In looking through prior years, I found=

that

> some of my interest payments were still in "Interest Exp", rather than

> "Interest Expense", so I changed them to get consistent results for all

> years and a proper total expense.)

> Let us know when you find what is causing this reporting problem. =A0I'm =

sure

> that others (including myself) will be interested.

> RC

> --

> R. C. White, CPA

> San Marcos, TX

> (Retired. =A0No longer licensed to practice public accounting.)

> r...@grandecom.net

> Microsoft Windows MVP

> (Using Quicken Deluxe 2009 and Windows Live Mail in Win7 x64)

> > I have read many postings in this forum and others on how to use Quicke=

> > to

> > record estimated tax payments, and I think I have understood the

> > principles, but

> > some of the practical details are causing me difficulties. I use Quicke=

> > 2007

> > Premier.

> > I set up an asset account for pre-paid federal tax (estimated payments =

> > my

> > case) and when I write the IRS a check I enter the asset account in

> > Quicken's

> > Category field (it shows up in the register surrounded by square

> > brackets). The

> > entry is something like this:

> > =A0 =A04/16/07 =A0(from) checking account (payee) US Treasury

> > =A0 =A0(category) [Fed Tax pre-paid] (memo) 2007 1040-ES

> > Note that this example is for 2007. I am using that tax year to test my

> > new

> > method, since it is a completed year (1040 submitted, refund received) =

and

> > therefore a simple case.

> > As the year progresses I accumulate more into the asset account - two m=

ore

> > payments just like the first one. And on Jan 15th 2008 I send in the fi=

nal

> > estimated payment - to follow the "transaction date within tax year"

> > philosophy

> > I enter this in Quicken on 12/31/07 with the date the check cleared sho=

> > in the

> > memo filed. The transaction =A0looks like this:

> > =A0 =A012/31/07 =A0(from) checking account (payee) US Treasury

> > =A0 =A0(category) [Fed Tax pre-paid] (memo) 2007 1040-ES 1/22/08

> > In April 2008 when I have completed my return, I get a refund and this =

> > entered in Quicken as two transactions - one showing the check deposit

> > assigned

> > to the asset account and reducing its balance, and the other showing a

> > transfer

> > from the asset account to an expense category for the actual total tax

> > that the

> > IRS got to keep, also reducing the asset account balance which now beco=

mes

> > zero.

> > As before, I apply dates within the relevant tax year. These transactio=

> > are as

> > follows:

> > =A0 =A012/31/07 =A0(to) checking account (payor) US Treasury

> > =A0 =A0(category) [Fed Tax pre-paid] (memo) 2007 tax refund 4/17/08

> > =A0 =A012/31/07 (from) [Fed Tax Pre-paid] (payee) US Treasury

> > =A0 =A0(category) Federal Tax Self (memo) 2007 Total Tax from 1040 4/17=

/08

> > So far so good. The asset account has returned to zero balance and I ha=

> > a line

> > in my expense category for the Total Tax amount. I think I have correct=

> > recorded the money flows, but I have problems generating reports that

> > include

> > all of these transactions correctly. So I am wondering if I really have

> > done

> > things right.

> > For instance, the last transaction described above, where I finally put

> > the

> > Total Tax retained by the IRS in an expense category, does not show up =

> > many

> > Quicken reports. The only standard Quicken reports that I have found it=

> > appear in are the Budget, Spending By Category and Spending By Payee

> > reports. It

> > is omitted from many others including:

> > - Banking Summary

> > - Cash Flow

> > - Itemized Categories

> > - Itemized Payees

> > - Income/Expense By Category

> > - Income/Expense By Payee

> > - Tax Summary

> > - Business > Cash Flow

> > So, my BIG question is: Have I used the correct method for recording th=

> > payments/transfers?

> > If the answer is no, then what should I be doing differently?

> > If the answer is yes, then the next questions is: How do I get the

> > transactions

> > to show up in Quicken reports properly?- Hide quoted text -

> - Show quoted text -

Hi Pat,

Finally someone posts a method for handling these taxes! I don't know
how I missed previous discussions of it, but it's bothered me longer
than I want to admit, and I've been a Quicken user for eons. Boy, do
I feel stupid. An Asset account... I sure didn't think beyond a very
narrow box with this one. I'm going to save this thread so I can go
back and fix my most recent years.

Re the reports, I think RC is on the right track. It's always been
some setting or category renaming that has made them drop out of
reports for me. Rc is almost always right about these things<g>.

jo

Posted by Andrew on August 16, 2009, 6:31 am

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pat_little wrote:

> I have read many postings in this forum and others on how to use

> Quicken to

> record estimated tax payments, and I think I have understood the

> principles, but ... > )

Pat - I trust when I re-post, I am going to get in a lot of "trouble" from
R.C. when I ask you the *real* question I have in mind, but I'll do it
anyway. But first, I need to know if you use Turbotax (or I supposed Taxcut
et. al) and import your tax information into those programs from Quicken?
--
-------------------------------------------------------------
Regards -

- Andrew

Posted by Andrew on August 21, 2009, 8:13 am

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Andrew wrote:

> pat_little wrote:

>> I have read many postings in this forum and others on how to use

>> Quicken to

>> record estimated tax payments, and I think I have understood the

>> principles, but ... > )

> Pat - I trust when I re-post, I am going to get in a lot of "trouble"

> from R.C. when I ask you the *real* question I have in mind, but I'll

> do it anyway. But first, I need to know if you use Turbotax (or I

> supposed Taxcut et. al) and import your tax information into those

> programs from Quicken?

So it looks like Pat is not going to answer, or perhaps isn't looking at
this thread anymore. So I'll ask my question and see what happens.
Assuming one does NOT use Turbotax to import tax info from Quicken, why go
to all the trouble that has been discussed here about setting up
'asset' accounts and so-on? Why doesn't one just simply categorize the
payment from your checking account to a category that is linked to one of
the
Sch "A" tax lines and leave it at that?

During your tax prep time, run one of Quicken's tax reports to see all the
transactions sorted by Schedules and manually take it from there?

Why make this so complicated? What am I missing??

--
-------------------------------------------------------------
Regards -

- Andrew