We recently released an enhanced estimated income tax payments model in our beta testing program.
Our refined estimated tax expense model builds on our existing approach to provide greater accuracy and clarity. By transitioning to a forward-looking model, we better align estimated payments with actual tax liability.
To use this enhanced modeling capability, login to your Planner, go to Member Settings in the top right hand corner, and toggle on “Beta.”
Key differences between the current tax model and the beta tax model
Shift from a backward-looking to a forward-looking model
Reduced reliance on the “20% withholding” logic for one-time events (e.g., disbursements, Roth conversions)
Annual estimated tax payments more closely align with actual tax liability
Reduced annual adjustments, particularly for major income changes (e.g., retirement, RMDs)
A simplified codebase for greater adaptability to future tax law changes
How do I compare the two models?
Compare the annual tax liability to the annual tax expense.
view your annual tax liability on the Estimated Taxes chart.
view your annual tax expense on the Estimated Expenses chart.
assess the alignment of annual estimated tax payments with actual tax liability.
you may experience significant variability in the current model.
you should experience minimal variability in the beta model.
For years when significant changes to AGI occur, such as the year after retirement or the year you begin taking RMDs
view your annual tax expense on the Estimated Expenses chart for the year after retirement or the year you begin taking RMDs.
In the current model, tax modeling is iterative and each year’s tax payments are based on the previous year’s tax liability. You may experience an overstated tax expense the year after retirement.
In the beta model, annual estimated tax payments based upon that year's tax liability. You should not experience an overstated tax expense the year after retirement.
For years when you have one time transactions such as Transfers, One Time Expenses, Disbursements, and Roth conversions
view your annual tax expense on the Estimated Expenses chart.
In the current model, one time transactions incur a tax payment equal to 20% of the transaction in the month of the transaction.
In the beta model, one time transactions will be taxed at your marginal tax rate for the year of the transaction.
If you have modeled one time transactions such as Transfers, One Time Expenses, Disbursements, and Roth conversions
and your marginal tax rate is higher than 20%, you may experience a tax increase with the beta model.
and your marginal tax rate is lower than 20%, you may experience a tax reduction with the beta model.
Boldin utilizes proprietary methods to reasonably estimate taxes and therefore tax estimates should only be considered directional. As needed, consult a tax professional for more precise tax estimate, payment, and filing requirements if you want more precise values.