Four times a year, we utilize your business profit numbers to help determine how much you owe in estimated tax each quarter. Before we dive in to the nitty gritty, let's go over some of the most important essentials that you'll need to keep up-to-date each quarter, in order to receive an accurate estimate:
- Upload any missing bank statements for your bookkeeper
- If your bookkeeper has requested to review any transactions, please do so
- Update your previous quarterly tax payments (just for the current tax year)
- Update your tax information each quarter
Below you can find how these calculations are determined:
Quarter 1 (due April 18, 2023)
We use your profit numbers from January and February to calculate what your profit amount would be for the year. Then, we'll calculate the amount of tax you would owe for the year based on your annual profit estimate.
Your estimated tax includes a calculation for both income tax and self-employment tax (if you're a sole proprietor). The calculation includes an estimated Qualified Business Income Deduction and 50% deductible portion of self-employment taxes.
We divide this number by 4 to get an estimate for the first quarter. This is performed for federal tax, state tax (if relevant to you), and city tax (if relevant to you).
Quarter 2 (due June 15, 2023)
We use your profit numbers from January through April to calculate what your profit amount would be for the year. Then, we'll calculate the amount of tax you would owe for the year based on your annual profit estimate.
Your estimated tax includes a calculation for both income tax and self-employment tax (if you're a sole proprietor). The calculation includes an estimated Qualified Business Income Deduction and 50% deductible portion of self-employment taxes.
We divide this number by 4 to get an estimate for the second quarter. This is performed for federal tax, state tax (if relevant to you), and city tax (if relevant to you).
Quarter 3 (due September 15, 2023)
We use your profit numbers from January through July to calculate what your profit amount would be for the year. Then, we'll calculate the amount of tax you would owe for the year based on your annual profit estimate.
Your estimated tax includes a calculation for both income tax and self-employment tax (if you're a sole proprietor). The calculation includes an estimated Qualified Business Income Deduction and 50% deductible portion of self-employment taxes.
We divide this number by 4 to get an estimate for the third quarter. This is performed for federal tax, state tax (if relevant to you), and city tax (if relevant to you).
Quarter 4 (due January 17, 2024)
We use your profit numbers from January through November of 2022 to calculate what your profit amount has been for the year. Then, we'll calculate the amount of tax you would owe for the year based on your annual profit estimate.
Your estimated tax includes a calculation for both income tax and self-employment tax (if you're a sole proprietor). The calculation includes an estimated Qualified Business Income Deduction and 50% deductible portion of self-employment taxes.
We then subtract what you have already paid in quarters 1-3 from the estimated annual tax owed. The remainder will be your fourth quarter estimate, which should "true you up" in estimated tax for the year. This is performed for federal tax, state tax (if relevant to you), and city tax (if relevant to you).
Reminder: These are still estimates, and it’s normal to owe some money at year end or have a refund coming your way. However, please note that if you underpay quarterly tax estimates or skip payments, you could be subject to an underpayment penalty.