What is the Estimated Quarterly Tax sheet?
The Tiller Labs Estimated Quarterly Tax sheet helps freelancers, consultants, and other small businesses estimate and forecast their quarterly taxes in real time. It’s a great tool for those who are required to pay taxes quarterly and do not have a job where taxes are automatically withheld from their paycheck.
The tool is not recommended for those with complex tax situations, those who may be subject to Alternative Minimum Tax, multi-member LLCs, partnerships, or LLCs taxed as an S-Corp. Review the Assumptions and Expectations section below for more information about how to use this tool.
Note : The intent of the tool is to provide estimates. Tiller makes no guarantees in regard to the accuracy of the calculations, tax rates or results. Consult with a tax advisor or accountant to validate the accuracy of the results. Review the Assumptions and Expectations section below for more information about how to use this tool.
Assumptions and Expectations
Please carefully review these assumptions and expectations about using this tool.
- This tool does not constitute tax advice. It assumes you are also working with a tax advisor or accountant to assess the accuracy of the results.
- The quarterly tax estimation is based the standard deduction per your chosen filing status. If you prefer to use an itemized deduction amount read more here.
- The quarterly tax estimate is created by prorating your deduction through the year. For example, in Q1, the tax calculation is built using ¼ of the deduction. In Q3, the calculation uses ¾ of the deduction. Consult your tax advisor to see if this approach is right for you.
- The state tax estimation is based on a flat tax rate percentage. Many states use a flat rate whereas others utilize a bracket system. You are required to calculate your effective state tax rate if your state uses a bracket system and input it into the manual state tax rate field.
- Methodology: The tool assumes you’re using cash basis accounting, not accrual basis accounting methodology.
- Estimated taxes in subsequent quarters are cumulative. They are calculated assuming you paid the estimated amount the tool suggested for previous quarters. (e.g. if the estimated tax for Q1— calculated on an annualized basis— is $100 and the estimated tax for Q2 is $250 the estimated tax calculation for Q2 will be $150, based on the assumption that you paid $100 in Q1). There is no override for this mechanism.
- The tool does not factor in reconciliation of any subsidies you may have received from the Healthcare Marketplace (through the Affordable Care Act, aka Obamacare) for health insurance (e.g. this means you could owe more or less depending on whether you were eligible for and/or took a subsidy offered for your health insurance).
- The tool does not factor in, or have a place to account for, tax credits you may receive that could lower your overall individual or joint tax liability (e.g. child care tax credits).
- This tool makes no comparison of your taxable income to any Alternative Minimum Tax calculation. Consult your tax advisor or accountant if you think you may be subject AMT. The tool will however, still give you a great snapshot of your tax liability in relation to all tax brackets, regardless of income.
- This tool does not account for other quarterly tax obligations outside of business earnings such as investment earnings, rental income, spousal income from a W2, etc.
- If you’re using the Business Mileage Adjustment section to account for vehicle use on a mileage basis be sure that you do not double count vehicle expenses as an additional business expense in the category sheet (i.e. don’t tag vehicle related expense categories as “Business.”
- If filing as Married - Filing Jointly, estimations will be most accurate if your spouse does not work/receive a W2 or have any other outside income The tool also does not account for child tax credits, dependent care credits, or dependent income if you have dependents.
- If filing as Head of Household, remember the tool does not account for child tax credits.
Get started in 4 easy steps
1. Add the tags column to your Categories sheet using the Tiller add-on.
The Tags column in the Categories sheet allows you to assign one or more tags to a category, and subsequently all the transactions that have the category applied.
2. Tag your business expenses in the new Tags column
Each category that is a business expense should be tagged “business. ”The Tax Estimator sheet looks for categories tagged as “business” when calculating net profit to get your cumulative taxable income.
3. Add the Estimated Quarterly Tax sheet
You can add the Estimated Quarterly Tax sheet to any existing Tiller-powered Google Sheet that has a Categories sheet.
4. Configure the sheet based on your tax situation.
Set your filing status, the tax year, and other important details that are specific to your tax situation and the sheet will start calculating your estimated quarterly taxes as your transaction data flows in.
How to add the Estimated Quarterly Tax sheet
The Estimated Quarterly Tax sheet can be added to any existing Tiller-powered Google Sheet that has a Categories sheet using the Tiller add-on for Google Sheets. The Est Quarterly Tax sheet leverages the Transactions and Categories sheet in your existing Tiller Google Sheet. It also leverages a Tags column in the Categories sheet, which will be added to the Categories sheet upon install of the estimator sheet if it doesn’t already exist.
- If you don’t see it in the add-ons menu at the top of your Google Sheet, install the Tiller add-on.
- Choose Add-ons > Tiller > Other Solutions > Tax Tools to open the sidebar.
- Choose “Create” under the Estimate Quarterly Taxes heading to add the Estimated Quarterly Tax sheet to your Tiller Google Sheet.
- You should see a new tab appear in your Google Sheet called “Est Quarterly Tax”
Configure the Quarterly Est Tax sheet for your situation
Once you’ve installed Tiller’s Estimated Quarterly Tax sheet you can configure it for your tax situation to calculate estimated small business quarterly tax payments.
Set the year.
Choose the new year if you’re hoping to estimate your quarterly taxes going forward into the new year. You can also choose the previous year if you want help estimating what you might owe for the last quarter of the year or whether you’ve paid enough already for the previous year and might have a tax bill for the April 15th tax deadline. The dashboard includes IRS data for tax years 2018 and 2019.
Set your filing status.
You can choose any of the four filing statuses available from the IRS.
Be aware that if you choose Married - Filing Jointly, the tool works best if your spouse is not employed.
Keep in mind that if you file as Head of Household, you must claim a dependent, and the tool does not account for child tax credits for which you may be eligible.
Set your taxes paid category.
The dashboard can automatically show how much you paid in taxes by quarter. To do this, the sheet asks that you choose a category that you use for the tax payments you’ve made throughout the year. For best results use the same category for federal and state estimated payments you make throughout the year. Payments appear in the row called “Tax Payments” lower in the dashboard.
Note : do not tag the category you use for quarterly tax payments as “business” on the Categories sheet.
Set your state tax rate.
Set your flat state tax rate or calculate and manually enter your effective tax rate if your state uses a bracket system. If you need to pay estimated taxes in more than one state, consult with a tax advisor on estimated state tax payments and which one to use for your primary state. Consult with a tax advisor on how to calculate your effective state tax rate if your state uses a bracket system.
Reviewing your estimated payments
At this point the Estimated Quarterly Tax sheet should begin calculating estimated taxes based on your categorized business income and expenses. It calculates the estimates based on categorized transaction data from your Transactions sheet. It only pulls in data for transactions categorized with categories tagged as “Business” on the Categories sheet for IRS tax quarters that correspond to the selected year.
Heads up, if you’re starting out with this tool at the beginning of a new year, and don’t have any business earnings or expenses just yet, you won’t see much in the Estimated Tax Due section. These estimated taxes are calculated in near real time as your transaction data flows in via Tiller’s automated bank feeds and you categorize on your Transactions sheet.
How the Estimated Quarterly Tax sheet works
Tiller’s Quarterly Tax Estimator sheet works by pulling in your transaction data for business income and expenses. It requires that you tag expense and income categories as “Business” on the Categories sheet in order for them to be factored into the tax estimation calculations.
The sheet uses your transaction data plus any optional manual adjustments you make and calculates a “net profit” by subtracting your business expenses from your business income. The net profit is ingested into the calculation engine that’s running in the hidden cells to the right of the main dashboard area.
Using the net profit amount, the engine calculates your self-employment tax and additional medicare tax (if applicable based on your net profit). It also calculates your regular federal tax (on an annualized basis) based on where your taxable income currently falls (i.e. year to date) in the tax brackets for your filing status and the selected year. As the year progresses, and your profit increases, your regular federal tax total will change as you progress through the tax bracket.
Understanding the Sections on the Estimated Quarterly Tax sheet
At the top of the Estimated Quarterly Tax sheet you have options to configure the sheet based on your tax situation. You also get a summary of when the next tax payment is due and the estimates for state and federal that would be owed on the specified date.
At the top you also get a graph of quarterly net profit versus estimated tax due to help you visualize your tax payments in comparison to your profits.
To the right of the Quarterly Net Profit vs Estimated Tax chart there is a Scratch/Notes area where you can add notes and do manual calculations to help you stay organized.
Net Profit & Estimated Tax Detail by Quarter
The Net Profit & Estimated Tax Detail by Quarter area offers a quick view into your quarterly earnings, spending, net profit, and estimated taxes. It also includes helpful reminders of reporting period date ranges and payment due dates.
The date ranges are based on tax reporting quarters for the IRS, not the normal quarterly date ranges for a calendar year. (i.e. Q2 is a two month quarter, whereas Q4 is a four month quarter.)
Income & Expense from Transactions
The Income & Expense from Transactions gives you a summary of your business income and expenses based on categorized data in the Transactions sheet. It’s pulling in the income and expense totals for any transactions that are categorized using categories tagged as “Business” in the Tags column on the Categories sheet.
Profit & Tax Payments Summary
The Profit and Tax Payments Summary area gives you a quick view of your quarterly net profit and estimated tax payments. The estimated tax payments are broken down by cumulative quarterly total, estimated federal and state payments, and the tax payments you’ve already made.
Business Income/Expense Category Detail by Quarter
At the bottom of the Estimated Quarterly Tax sheet you’ll see a breakdown of your spending and earnings organized by type (income vs expense), group, and category for categories that are tagged as “Business” on the Categories sheet. This table is a useful reference to help you visualize your quarterly figures for business specific categories. The first business income category listed is highlighted in green and the first business expense category is highlighted in red to help you quickly delineate where your income and expense categories start and stop.
Using the Hidden Grouped Adjustment Area
Starting at row 28 a group of rows is hidden by default that offer other adjustments you can make to fine tune your estimates.
Making Adjustments to Net Profit
Out of the box you get an estimate of taxes owed as your data flows in, but if you need to make other adjustments to your business income or expenses you can add these using a group of hidden rows starting at row 28 in the dashboard.
Click the + next to row 28 to unhide the manual adjustments area.
Manual Income/Expense Adjustments
These light green fields enable easy adjustments to income and/or expense by quarter. For example, if you accidentally put $1,000 of business expenses on your personal credit card, you could add -$1,000 to the Expense Adjustment line to ensure that cost is included.
Expenses should be entered as negative values (-1000) and income should be entered as positive values (1000). You may need to do some offline calculations to get the totals for income and expense adjustments that should be used here. Use the scratchpad/notes area at the top to keep track of or make calculations for manual adjustments.
Note : the adjustment cells should only be used for business income and expenses that affect net profit to help calculate self employment tax owed.
You can also use these cells for forecasting your estimated quarterly payments if you have a good idea of how much you will earn per quarter.
Home office expenses can also reduce your net profit. Some expenses are applicable to reduce this net profit amount by a percentage calculated based on the square footage of your office compared to your entire home. Other expenses are applicable at 100%. Consult with your tax advisor or accountant to determine which expenses are applicable, and whether they’re applicable at 100% or at a prorated amount.
Adding home office adjustments
- Enter the square footage of your home office and the square footage of your entire home or apartment.
- Enter the quarterly amount for rent or mortgage interest for the entire property for each quarter.
- Enter in other home office related expenses that should also be prorated such as utilities, property taxes, or home/renters insurance.
- Enter in any expenses related to home office that should be included at 100% such as a home office remodel.
Note : all expenses should be entered in as negative values.
You can also adjust your net profit mileage associated with business related travel. The sheet automatically calculates the dollar amount for you using the IRS’s standard rate for the tax year based on the mileage entered.
- Enter in your total mileage per quarter into the “Business Vehicle Mileage” line on the Estimated Tax sheet
If you prefer to itemize your business vehicle expenses do not enter in your mileage for business related travel into the Business Mileage adjustment area. Instead use the “Business” tag for those categories and these expenses will be factored into the net profit calculation automatically. For accuracy, it is important to choose one or the other approach, but not both.
The Estimated Quarterly Tax sheet defaults to using the standard deduction based on your filing status to calculate your quarterly estimated tax payments. Consult with your tax advisor or accountant on whether you should use the standard deduction or an itemized deduction amount for your quarterly estimated payment calculation.
If you wish to use an itemized deduction amount instead:
- Unhide the columns on the right half of the dashboard by clicking the small arrow to the right of Column L in the column header area.
- Change the “Deductible Type (Standard/Itemized)” to “Itemized”
- Manually enter an itemized deduction amount in the row below. As with the standard deduction, your itemized deduction will be applied in a prorated fashion.
Projecting Payments for the Year
If you start out using the Estimated Quarterly Tax sheet at the beginning of the new year, you won’t see much useful data for your estimated payments until your expenses and income starts flowing into the Transactions sheet. To help you plan ahead you can use the manual adjustment areas of the Estimated Tax sheet to project how much you should anticipate paying in taxes for the year for your small business.
Create a forecast for the year
- Unhide the manual adjustment cells by clicking the + sign next to row 28.
- Enter your expected income and expenses into the light green cells in the Business Income and Business Expense area for each quarter.
- Optionally, enter home office and business mileage quarterly projections for the year.
- Review your estimated tax owed information.
Once you’ve added projection figures for each quarter in the adjustments area of the Estimated Tax sheet you’ll start to see estimated payments per quarter based on your inputs.
Maintaining Projections with Transaction Actuals
If you choose to project your net profit at the beginning of the year an important maintenance step with the Estimated Tax sheet is to update your projections for each quarter as your transactions actuals come in for income and expense. This is important because the net profit is calculated by adding your manual adjustments to your actuals so if you never updated the manual adjustments you’d be double counting in your net profit.
When you get to the end of the quarter update the manual adjustment for income and expenses to only include manual adjustments and remove the projection data for the quarter. Then you’ll see your estimated tax owed for the quarter in the Estimated Tax Due section.
Tip: use the scratchpad/notes area to keep track of items that might need to be factored in to your manual adjustments or to record your projection figures.