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View Edit Taxes

Reports > View/Edit Taxes

The View/Edit taxes screen shows in detail the federal income tax calculation.

This calculation will be used in the child support calculation, if your state uses taxes in its child support calculation.

It will also carry to the Budget Report.

On the What If analysis, the exact same calculation is used behind the scenes, to calculate taxes in the What If scenario.

On many lines of this report, there are “more info” links, which show the details of the calculation behind that line.

With all these screens, it should be possible to completely follow every detail of the federal income tax calculation.

You can use this to understand how a number was arrived at, or if the accuracy of the calculation is challenged by opposing counsel or a judge.

All of the entries that appear here are made on the Client Info tab of the software.

Occasionally, you may need to override an entry on this page, where the tax treatment of a value is different from the cash flow.

If you do that, the taxes will calculate using the overridden number.

It is possible to end up with a negative income tax amount.

This can happen if the credits, such as the earned income credit and/or the child credit are more than the tax due.

This routinely happens in situations in which a party is supporting a child and the parties taxable income is less than $40,000 per year.

Future Years’ Taxes

At the top of the screen, you will see that you can look at the taxes for future years.

The software has built into it all known future tax laws.

If a tax provision is specified to occur in the future, that provision will be reflected in the future year.

If a tax act is in effect that has a sunset provision, for years after the sunset, the taxes will be shown as in effect after the sunset.

The software also has built into it estimates of inflation adjustments for tax brackets, standard deduction, the earned income credit, and everything else that has an inflation adjustment in the tax law.

The software also has built into it anticipated wage increases and expense increases.

By default, both wages and expenses will increase with inflation.

You can specify that wages increase at some other rate on the “more info” screen for wages.

You can also specify that the inflation rate will be zero, so that none of these things will increase with inflation.

You can do that on the Files & Settings >Settings >Assumptions screen.

You can also show what taxes would have been in a prior year.

To do that, simply change the Start Year in the software.

You can do that by clicking Reports >More Reports, and changing the Start Year on that screen.

The software has accurate taxes going back to the year 2000.

Future Years’ Interest and Dividends

Sometimes people see interest and dividend income appearing on the View/Edit Taxes report for future years, but they have not entered any interest or dividends.

They wonder where the interest and dividends are coming from.

Typically, they are coming from Accumulated Savings, which is explained as follows:

If there is any net income left over at the end of the year, the software automatically invests that net income in a diversified portfolio, through a hard-coded account known as Accumulated Savings.

This emulates what people do in the real world with positive net income: they invest it.

That diversified portfolio yields interest and dividend income.

The software does this to accurately project cash flow and net worth in future years.

However, if you want to eliminate that interest and dividend income, do the following:

1. Click Files & Settings > Settings > Assumptions.

2. Scroll down to the section on Rates of Return and Borrowing Costs.

3. Set all the rates of return to zero.