Quarterly estimated tax payments spread your tax bill across the year instead of leaving it all until you file. Getting them roughly right protects your cash flow and can help you avoid an underpayment penalty. Collective works out your estimate for you. When you open the page it is already there, and the questions that follow let you check the assumptions behind it and adjust as your year changes.
This applies to both membership tiers. The calculation works the same way, but the business income figure comes from a different place: LLC tier members estimate business income from Schedule C profit, and S Corp tier members use business profit from their K-1. In both cases, other household income is factored in as well, because quarterly estimated tax is an individual tax rather than a business one.
Where to find your estimates
In your dashboard, go to Taxes, then Quarterly Estimates. The page is titled Quarterly payments and has two tabs.
- Estimated Taxes is your personal quarterly estimate, split between federal and your state.
- Fees and Franchise Taxes covers entity-level taxes your business owes, such as the DC Corporate Franchise Tax or California business taxes. These are separate from your personal estimate, and both can be due in the same quarter. Note: This tab only appears if your business owes something, so you may not see it.
Your current estimate appears on the right, with Review estimate to review or change it. Below that is Past payments, a history of everything you have recorded.
Choosing your calculation method
Select Review estimate to walk through a short set of questions. All of them are on one page, so you can scroll back and change an answer at any point.
The first question asks which of two approaches matters more to you this quarter:
- "Use my current-year business projections for the most accurate estimate" uses your actual numbers from this year instead of last year's return. It targets what you are likely to owe, which suits a year that looks different from the last one, or a year where last year's return is not filed yet. Because it relies on a projection, it carries more penalty risk if your income comes in higher than expected.
- "Use last year's taxes to keep my payments steady and help avoid underpayment penalties" is the IRS safe harbor method. It uses your prior year tax, so your four payments stay level and predictable. Under current law, this generally shields you from an underpayment penalty if you pay 100% of last year's total tax, or 110% if your prior year adjusted gross income was above the higher-income threshold. Check the current threshold on IRS.gov, and note that it is lower if you file as married filing separately. If you choose this method you won't be asked about your income at all, because the estimate comes from your prior return rather than this year's figures.
Both methods are permitted under IRS rules, and you can change your choice any time you review your estimate. Which one fits depends on your situation. If you are not sure, your Collective team or your tax advisor can help you think it through.
As you answer, your estimate updates on the left, along with a Tax overview showing your annual tax liability, the share of it owed so far, tax withheld, and payments recorded.
Telling us about your business income
If you chose current-year projections, we'll show you the figure we have and ask you to check it: "We're showing your business is on track to make $[amount] for the year. Does this number seem about right?"
- Yes, this is in line with what I expect keeps the figure from your books.
- No, I expect it to be higher/lower opens a box where you can type your own number.
The figure we show is your projected annual profit, not revenue, and the box you type into asks for profit too. Entering gross revenue will inflate your estimate significantly. If the number looks far too low, check you aren't comparing it against your revenue.
After typing a figure, select Continue. Your estimate won't update until you do.
If you've used the tool before, you'll see a different version of this question quoting back what you told us last quarter, with Yes, that's still accurate or No, that's changed.
Telling us about income outside your business
If you chose current-year projections, you'll be asked whether you or your spouse have income from outside your business. Answering yes opens follow-up questions covering freelance work reported on a 1099, salary from another job reported on a W-2, and gains from investments you sold.
The investment question has two amount boxes. The first is for short-term gains and the second for long-term gains. Both ask for the gain, not what the sale was worth.
Anything you enter here is included in the calculation, which makes your effective tax rate more accurate. Anything you leave out is not, so it's worth completing these even if the amounts are small.
Telling us what you've already paid
Two questions reduce what is left to pay this quarter.
- Tax withheld from a paycheck. If you or your spouse have a job where an employer takes tax out of each paycheck, answer yes and enter the year-to-date total from your most recent pay stub.
- Payments you or your spouse have already made. Answering yes opens a short form where you can record a payment without leaving the flow, including the tax type, year, quarter, amount, date paid, and a receipt.
If you skip these, your estimate is calculated as though nothing has been paid. That is the most common reason an estimate looks higher than expected.
Your filing status and dependents
Your state of residence, filing status, and dependents all affect your tax rate. These aren't part of the question flow. Select Tax profile in the top right of the Quarterly payments page to update this info.
There you can update your state of residence and your federal filing status, tick My State filing status is different if your state status doesn't match your federal one, and add dependents. Each dependent needs a full name, date of birth, and Social Security number.
If a date of birth is rejected, check you've typed the full four-digit year. A two-digit year is read literally, so 01/01/21 becomes the year 0021.
If any of these have changed, update them here and then run Recalculate to run the calculation again.
Viewing your calculation totals
Select See calculation breakdown while you're answering the questions, or How we calculated this on your estimate once you've finalized it.
What you see depends on the method you chose.
If you chose last year's taxes, it shows your prior year tax bill, the safe harbor rate applied to it, and what you've already paid. The rate is worked out separately for federal and your state, so the two percentages can differ.
If you chose current-year projections, it shows:
- Your estimate total, split by jurisdiction
- Income, separated into business figures and each category of outside income
- Tax already paid, covering both recorded quarterly payments and other withholding
- The tax rates applied, including your marginal rate, effective rate, and projected annual liability
If a number looks wrong, this is the fastest way to find which input is driving it.
Finishing and paying
Finalize my estimate becomes available once every question on the screen has an answer. Once you select it, your estimate splits into one card per jurisdiction, each with its own amount, due date, and progress bar.
From each card you can pay the tax authority directly, using Pay at IRS.gov or your state equivalent, or select Record payment to log a payment you've already made. Recalculate takes you back into the questions.
Federal estimated payments use your personal Social Security number rather than your business EIN, because this is an individual tax. Collective never debits your account, so every payment originates with you.
After paying, record the payment and attach your confirmation under Payment Receipt. That upload is what marks the amount as paid, and the progress bar fills as payments are recorded. Nothing syncs automatically from the IRS or your state, so a payment you don't record won't appear in your history.
If you owe $0
If nothing is owed this quarter, the progress bar won't appear at all. That's expected, and you can still record a payment if you want to.
To fix a payment you recorded incorrectly, open it in Past payments and edit it there. You can also add a receipt or remove one you attached by mistake. Don't record the payment a second time, because that counts it twice and makes your next estimate too low.
Running it again
You can run Recalculate as many times as you like, and your estimate reflects the most recent run. There's no need to contact us to have it recalculated. It's worth running again if your income is materially up or down, you've added an income stream, your filing status or dependents have changed, or you've moved states.
To review or update your estimate now, head to Taxes, then Quarterly Estimates in your Collective dashboard. If your situation is more complex than the question flow accounts for, reach out to your Collective team. They're here to help.
Disclaimer: The information contained in this article is provided for informational purposes only and should not be construed as legal, financial, or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate and/or licensed adviser, or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.