CFO Q&A - Tax Estimates

CFO Q&A - Tax Estimates

podcast secure - tax minimization Mar 29, 2024

Do you find yourself struggling to understand tax estimates as a business owner, particularly when dealing with fluctuating income and expenses? You're not alone. In this episode of "Keep What You Earn," Shannon addresses a pressing question that many entrepreneurs face: how should S corporations handle estimated tax payments throughout the year? We'll delve into the practical considerations and advice shared by Shannon that can empower you to take control of your tax obligations and financial planning.

Understanding Tax Estimates

Shannon Weinstein dissects the concept of tax estimates, highlighting the inherent challenge in relying solely on prior year's information to make quarterly estimated tax payments. She emphasizes the discrepancy that can occur when circumstances change, such as fluctuating profits, business pivots, and varying expenses. The traditional approach of paying estimated taxes can often lead to either overpayment, resulting in a refund, or underpayment, leading to scrambling at tax time.

Practical Guidance for Entrepreneurs

Shannon introduces a proactive approach to estimating tax payments, emphasizing the importance of monitoring quarterly profits and setting aside a percentage of the profit (approximately 30%) for tax purposes. This practical approach involves maintaining a high-yield savings account where funds can be accumulated to meet tax obligations when they are due.

Skipping Estimated Tax Payments: Unconventional, Yet Strategic

In a departure from conventional wisdom, Shannon suggests skipping the first two quarterly tax payments to counter the unpredictability of business income and expenses. This unconventional strategy aims to provide entrepreneurs with a more accurate picture of their annual tax liabilities, allowing them to avoid overpayment and the subsequent delay in reclaiming overpaid taxes.

The Power of Projections

Suggesting the implementation of a mid-year pro forma, Shannon advocates for a forecast-based approach to anticipate and plan for tax liabilities. By simulating tax returns based on year-to-date financial data, entrepreneurs gain invaluable insight into their potential tax obligations, enabling them to set aside funds systematically and embrace a proactive stance in managing their finances.

Empowerment Through Advanced Notice

By emphasizing the importance of actionable and advanced financial advice, Shannon challenges the traditional model of tax services, calling for a more forward-thinking and collaborative approach. The sentiment is clear: entrepreneurs should seek financial professionals who provide not just paperwork, but perspective—offering strategic guidance tailored to the ever-evolving needs of modern business owners.

CFO on Demand: Empowering Entrepreneurs

Shannon introduces "CFO on Demand," an innovative monthly service co-created to bridge the gap between traditional tax services and hands-on financial empowerment. This accessible platform offers entrepreneurs a direct line to expert advice, transforming quick questions from potential burdens into opportunities for learning and growth.

Take Control of Your Financial Future

Shannon's insights transcend conventional tax advice, urging entrepreneurs to take control of their financial future by embracing proactive financial planning and seeking supportive, forward-thinking financial guidance.

In summary, understanding tax estimates as an entrepreneur demands a shift from reactive to proactive financial planning. Shannon Weinstein's practical guidance emphasizes the value of monitoring and setting aside a portion of profits for tax obligations, leveraging mid-year projections, and collaborating with financial professionals who offer strategic support year-round.

As an entrepreneur, you have the power to steer your financial course and establish a proactive approach to tax estimates that aligns with the dynamic nature of your business.

If you're eager to delve deeper into the practicalities of tax estimates and proactive financial planning, consider exploring "CFO on Demand," where hands-on financial empowerment meets innovative support tailored to the unique needs of entrepreneurs. By taking charge of your financial future, you can navigate tax obligations with confidence and unlock the potential for sustainable business growth.

In conclusion, tax estimates need not be a daunting aspect of business ownership. With practical guidance and a proactive mindset, entrepreneurs can embrace tax planning as a tool for financial empowerment and informed decision-making.

What you'll hear in this episode:

03:39 Guidelines for estimated voucher payments and profit.
07:40 Keep track of fluctuating amounts, be prepared.
10:09 Predict and plan for tax liabilities in advance.

If you like this episode, check out:

Are Quarterly Taxes Necessary For You?

Tax Implications of Digital Product Sales

Determining the Appropriate Salary for an S Corp Owner


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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.