TurboTax expert answers tax questions
Last week, I asked you to email me with some feedback on the column. Thank you to everyone who obliged. As promised, you’ll receive my book “Managing Retirement Wealth” in the mail as a thank-you.
Now back to business.
Let’s talk about letters you sent to me with tax questions specific to TurboTax, an Intuit Inc. tax preparation service. I’ve collected a number and have answers for you from TurboTax’s tax expert, Lisa Greene-Lewis, CPA, whom I quote in the answers to each question.
Q: From “L,” a (San Jose, Calif.,) Mercury News reader, about itemizing:
“Just did TurboTax for 2018. Since (I’m) now taking the standard deduction, no more itemizing, my guess is I won’t need to keep receipts for things that I normally would itemize?”
Lisa’s response: “Yes, if you already filed your 2018 taxes and you benefit more from taking the standard deduction under the new tax law, then there is no need to keep your receipts unless you need to save them for other reasons, like you purchased a home and you need to keep your settlement statement. However, for tax year 2019 your tax situation could change, and you may have more tax deductions that can bump you over the standard deduction, so I wouldn’t give up on itemizing your deductions when you file your 2019 taxes. You may donate more to charity or have more medical expenses.
“To see where you stand, you can use TurboTax’s Standard vs. Itemized Deduction Interactive, which you can find at http://tinyurl.com/yacjsxo4.”
Q: From J.S. of San Ramon, Calif., about estimated tax payments:
“If the increased (capital gain-related) income is received in a month in which the estimated tax payment is due, in what month is the increased estimated tax payment due which reflects the new, increased capital gain?”
Lisa’s response: “Estimated tax payments are due quarterly (four times a year), so for tax year 2019, the first quarterly payment is due April 15, 2019, the second is due June 17, 2019, the third is due Sept. 16, 2019, and the fourth is due Jan. 15, 2020.
“If you received the additional income in any of those quarters, it would be considered when you figure out the estimated payment.
“In some cases (for example, if you are self-employed), you may also be able to avoid estimated tax penalties if you can use the annualized installment method at tax time to reflect your fluctuating income and avoid estimated tax penalties (see IRS Publication 505).
“The annualized method determines your estimated tax liability as your income accumulates throughout the year instead of dividing your entire year’s estimated tax liability by four as if your income was earned evenly. So, if your income is concentrated, for example, in the fourth quarter of the year, you may be able to annualize your income.
“TurboTax Self-Employed guides you through the annualized installment method at tax time. Also remember that generally you are required to make estimated tax payments if you expect to owe $1,000 or more for the tax year.”
Q: From M.D. in San Jose, Calif., about reporting sales tax paid:
“This year, for the first time, I will do my taxes by TurboTax rather than hire an accountant. This has gone smoothly, except for two things — one of which I hope you can clarify. The state tax form asks if I’ve bought anything from out of state and wants me to pay sales tax on anything I bought out of state. Is that correct?”
Lisa’s response: “Yes, in general you are required to pay sales tax on out-of-state sales.”
M.D.: “What if I have bought something from another state that charges sales tax? Will they charge me sales tax?”
Lisa’s response: “Yes, if you purchase something and an online retailer and other out-of-state retailers are required to collect tax in that state regardless of physical presence in that state, you have to pay state sales tax. States now have the right to require tax collection from online retailers and other out-of-state retailers with no physical presence in their state if they meet certain economic thresholds.”
Let me extend a special thank-you to Lisa. You’ll find additional answers to reader questions in my blog at www.juliejason.com/blog.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (firstname.lastname@example.org). Her awards include the 2018 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.