Quarterly Estimated Taxes Start from last year's total tax

Use total tax, not your refund

Most owners remember their refund, or the check they wrote in April. Those numbers show what was left after withholding and estimated payments. Neither one is your tax for the year.

The safe harbor uses total tax. That's the full tax for the year, before any payments are subtracted. On Form 1040, look for the line that says "This is your total tax." If you bring us your refund instead, we'll ask to see the return.

If last year's adjusted gross income was over $150,000, you need 110 percent of that total tax to meet the safe harbor. If you're married and file a separate return, the limit is $75,000. We check this on the call, so you don't need to work it out before you book.

When you didn't file last year

If you didn't file a return last year, there's no last-year number to use. The same is true if last year's return covered less than 12 months. Then the only safe harbor left is 90 percent of this year's tax, and that comes from your books.

An extension that never turned into a filed return works the same way. In both cases, we set your payments from 90 percent of this year's tax, using your books.

A new business is a different case. If you filed a personal return last year, its total tax still counts, even if the business didn't exist yet.

If you had no tax at all last year and were a U.S. citizen or resident for the whole year, you won't owe an underpayment penalty this year. Last year's return has to cover a full 12 months for that rule to apply.

When you're using this year's numbers

Up-to-date books mean the month is finished and your accounts match your bank statement. That's the bookkeeping behind the 90 percent option. We can start with a single finished month. As more months are finished, they cover more of the year, and we'll tell you which due dates your finished months can support.

If all you've filed is an extension, tell us. An extension only pushes back the date for filing your return. It doesn't move the due dates for your estimated payments.

What to put in your note

A short note works best: last year's total tax, the year it's for and the due date you're facing. If you'd rather not type a number, just say the return is filed and bring it to the call. We can find the one line we need together.

If this year is different, add one sentence about why. Maybe you lost a big customer, opened a second location, started paying yourself wages or a partner left. That tells us whether to stay with last year's number or look at your books. You don't need a forecast.

Questions owners ask about last year's return

Is my refund the number I divide by four? No. The refund is what was left after the tax you already paid. We use the total tax line. If you only remember the refund, bring the return and we'll find the line with you.

What if last year was a loss and my total tax was zero? Tell us. If you had no tax last year and the other conditions fit, there's no penalty this year. We'll check whether that applies to you.

Does self-employment tax count? Yes. Total tax includes self-employment tax, so it's part of the number we start from.

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