Let’s start with the basics of income tax estimates. In certain circumstances, entities or individuals may need to pay estimated taxes during a given tax year. This is generally relevant for C-corporations when they expect to owe more than $500 in federal income tax (state thresholds vary) in a given year, and for owners of flow-through tax entities (such as S-corporations, Partnerships, and Single-member LLCs) who expect to owe more than $1,000 of federal individual income tax (state thresholds very) in a given year.
If tax estimates are required, they are generally made in 4 installments throughout the year. For corporate calendar year taxpayers the due dates are April 15th, June 15th, September 15th, and December 15th. For individual calendar-year taxpayers, the due dates are April 15th, June 15th, September 15th, and January 15th (of the following year).
In order to have an indication of whether your corporation will be profitable in 2023, some adjustments to your Finaloop P&L may be required. The first thing that needs to be done is to make sure that the books are up to date. This includes ensuring that all transactions from banks/CCs are properly classified, that COGS is up to date, and that there are no open missions. Once you've checked that the books are up to date, make sure to set the correct date range on the P&L report.
Then you can use the calculator below to assist you in converting your Finaloop P&L into numbers that can be used for estimated taxes. Please note that the calculator assumes that your business operates consistently throughout the year and therefore it annualizes the profit from a given period.
If the result from the tax estimates calculator is positive or you believe that you will end 2023 with a positive taxable income, please make sure to share it with your tax preparer.
S-corporations, Partnerships, Schedule C:
Individuals who are sole proprietors or have an ownership in flow-through entities may, in certain circumstances, be required to pay tax estimates based on their prior year income or expected current year income.
'Flow-through' taxpayers include partnerships, S corporations and single member LLCs.
The income or loss from these businesses is passed through to the individual owners. This means that the individual owners are responsible for paying taxes on their share of the business income or loss.
Individuals who have an ownership interest in flow-through entities should be sure to factor in their share of the business's estimated income or loss while determining their tax estimates throughout the year.
Your tax preparer will use the income or loss generated by your business (or multiple businesses) as part of the full picture of your individual tax liability and the corresponding tax estimate payments (if any).
The calculator below will help you and your tax preparer calculate the estimated business taxable income using the Finaloop P&L data. The first thing that needs to be done is to make sure that the books are up to date. This includes ensuring that all transactions from banks/CCs are properly classified, that COGS is up to date, and that there are no open missions. Once you've checked that the books are up to date, make sure to set the correct date range on the P&L report.
The result from the calculator below can be added to the overall taxable income you generated as an individual taxpayer for purposes of calculating potential tax estimates throughout the year.
Please make sure to share the result of the calculator with your tax preparer, so that they can factor it into your personal tax obligations or refunds.