Understanding the tax payments in My Plan
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.
The tax liability provided in the Insights > Tax > Estimated Tax Chart represents the actual tax liability for the year.
The Planner reconciles the tax liability of the current year in January of the following year. This is what you see on the Insights > Income & Expenses Chart. That is, the tax liability provided in the Insights > Income & Expenses Chart represents the prior year’s estimated tax liability.
You should be able to match the tax liability from one year's Insights > Tax > Estimated Tax Chart liability projection with the tax liability of next year's Income and Expenses > Estimated Expenses Chart.
This is a limitation of circular calculations, and in most years the difference in estimation and liability is small. In years where unordinary events occur — such as one in which you stop working, claim Social Security, or sell a house — you may see a difference.
If your income drops significantly within a year, you will see an overpayment year followed by a refund the next year. If your income increases significantly, you will see a higher than normal tax liability in the following year.