Tax Planning estimates for 2023

[KTimber]

I have a client who is going to make 250K in 2023.  To compute the 2023 estimated tax, should I deduct the client's drawdowns and independent contractor payments and use the net income as the business income for the estimate computation?

Thanks 

[Just-Lisa-Now- · Accepted solution]

I use Save As and make a What If file and use that to compute 2023 estimates.  Then I can delete or add whatever may be different for 2023 without having to worry about screwing up the 2022 file.   Then you can use that tax liability as your estimated amount for payment vouchers in the real 2022 file if needed.

Make sure if you do this, to uncheck the EF boxes on the What If file, so you dont get the dreaded Duplicate SSN message in Homebase.

[qbteachmt]

What are "client's drawdowns?" Are you describing your taxpayer taking draws from their sole proprietorship (not an expense)? Or, distributions from their S Corp (not an expense)?

And is the business really the only type of taxable income this person will have?

[KTimber]

Yes drawdowns like distributions, he takes a monthly transfer from the business account. 

Yes, that's the only taxable income. 

Thanks

[KTimber]

It's a sole proprietorship. It's registered as an LlC. 

Thanks

[Just-Lisa-Now-]

draws aren't an expense, you pay tax on your profit, regardless of how much money you actually took for yourself.

[KTimber]

How about if the client pays himself a salary instead of a drawdown. 

Thanks 

[IRonMaN]

Sole proprietors can’t pay themselves wages.

[qbteachmt]

"Sole proprietors can’t pay themselves wages."

Because all of it is theirs, already. They are not a cost to their own business.

"It's registered as an LlC."

You mean LLC?

Have you considered Safe Harbor for estimates? See this article:

https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-how-to-determine-what-to-p...

That's what I rely on when a client has a constantly changing taxable income, and it's especially useful when they are on a constant increase. You just have to explain the difference between Safe Harbor and actually having paid in enough in estimate payments that they will hardly owe a balance, or at the least, they intend to be prepared if there is a large balance due (but at least they are not subject to penalty and interest).

[KTimber]

Can I use the tax planning feature on Pro series to do the same as noted above? 

Thanks

[KTimber]

Thanks so much.