TaxRearview Mirror · Are we current, and what do we owe?
How much do we owe in taxes?
You should be able to name this year’s tax bill, and what’s left to pay, as a dollar amount, before anyone asks.
Surprises come from estimates based on last year’s numbers, a strong year nobody planned for, and payroll or sales tax that fell behind. The fix is to calculate the number on a schedule instead of finding it out in April.
An approach
- Start with profit to date. Year-to-date taxable profit, from closed and accurate books.
- Project the full year. Add a realistic estimate for the months that are left.
- Apply your effective rate. Ask your tax accountant for the combined federal and state rate that fits your entity and situation.
- Subtract what’s already paid. Estimated payments made so far this year. What’s left is what you owe.
- Set it aside and schedule it. Move that amount, spread across the remaining payment dates, into a separate tax account.
You can answer it when
- You can name this year’s expected tax bill in dollars.
- You know what’s paid, what’s left, and when each payment is due.
- Payroll and sales tax filings are current.
Related
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