estimated taxes

[Sears]

Hello: I have a new client who just started operating his business in december 2022...he claims that he really only made income in 2023 I am waiting to have access to his QBO to see exactly. The question is does he need to prepare estimated taxes? If no income/tax liability in 2022? I am preparing the engagement letter and trying to determine the scope....

[IRonMaN]

Depends on what his 2022 income tax liability was.  How much income does he anticipate earning and how much is needed to be paid in to cover the safe harbor?

[itonewbie]

As @IRonMaN says.

The safe harbor establishes the minimum amount a taxpayer needs to pay in for ES-tax to avoid underpayment of estimated tax penalty.  The simplest case is that your client is below the threshold for making any estimated tax payment at all.  You would obviously account for whether you would quote your client a fee that would include the preparation of ES-tax vouchers.

Scoping the engagement would be much broader than that.  It would involve looking into the future based on anticipate life event changes, changes in personal finances, timing of income and expenses, to help your client assess whether the safe harbor is the best option as well as how best to mitigate any potential tax and/or P&I exposure.

[qbteachmt]

It's more than just that business.

Estimates are paid, plus withholding is an option, against all taxable income in that taxpayer's return. Ask about the household financial activity. Not just the business.

[rcooley25]

Here is what I have done in the past when I could not make a decision about estimated taxes based on the previous years tax return. Have your client come to you for a review after 6 months and then make a decision about estimated tax payments and spread them over the last two payments for the year.