Learn more about the Estimated Income Tax Payments in My Plan!

The software pays tax expense in the current year based upon projected income and tax liability. The data entry expects gross income and then makes your tax payments. This is analogous to your employer withholding tax from your pay, or quarterly estimates you might make.

in your forecast. income taxes are modeled as monthly payments. Income from streams such as work, pensions, annuities, and passive income as well as RMDS will incur monthly payments at your marginal tax rate.

One time events such as Transfers, One Time Expenses, Disbursements, and Roth conversions incur a 20% tax payment in the month of the event.

Insights > Tax > Estimated Taxes > portrays the estimated taxes for the current year.

Insights > Income and Expenses > Estimated Income Tax Payments portrays the actual tax payments funded from income and savings withdrawals in the current year.

In most years you should be able to match the tax liability from one year's Estimated Tax Chart liability projection with the tax liability of next year's Estimated Expenses Chart. Any difference you see is due to the annual reconciliation. This item is not reflected in the charting at this time.

There is a reconciliation each January which determines whether the estimated payments for the prior year were accurate. If not, an adjustment is made for the prior year. Things smooth out once significant changes are past and we do not recommend adding amounts back via windfalls or any other method.

If the tax paid in the previous year (ie: 2024) was insufficient, an additional tax expense is added to the Estimated Income Tax Payment in January of the subsequent year (ie: 2025).

If the tax paid in the previous year (ie: 2024) was overstated, a deposit is made in January subsequent year (ie: 2025) to the account used for Excess Income. If you are saving Excess Income, the Excess Income account balance increases.

For this reason, in years where income drops or increases significantly within a year, you will see more variability in the tax projections. For example, the tax expense often appears higher in the year after retirement because it is the tax expense of the prior (higher income) year.

NewRetirement 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.

PlannerPlus is currently a forward-looking projection engine. The calculations and projections move forward each month. For this reason, we recommend using tax software or working with a tax professional for current year tax planning.

This Planner is intended to help you create a long term financial plan, understand the interdependencies among plan elements, and make sound decisions. Each plan is founded on multiple assumptions such as asset growth rates, inflation, and income tax legislation. As a result, the estimated account values, withdrawals, and tax liability will fluctuate.