Quarterly estimated tax payments spread your tax bill across the year instead of leaving it all until you file. Getting them close to right protects your cash flow and can help you avoid an underpayment penalty. Collective gives you a tool to build your own estimate, so you can see the numbers behind it and adjust as your year changes.
This article applies to both LLC and S Corp tier members. The calculation works the same way for both, with one difference: 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 counts too, because quarterly estimated tax is paid on your personal return, not by your business.
Where to find your estimates
In your Collective dashboard, go to Taxes, then Quarterly Estimates. The page is titled Quarterly payments and has two tabs:
- Estimated Taxes: your personal quarterly estimate, split between federal and your state.
- Fees and Franchise Taxes: 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.
Your current estimate appears on the right. Select Review estimate to check it, or Recalculate if you've already finalized this quarter. Past payments, below it, shows every payment you've recorded.
Selecting Review estimate (or Recalculate) walks you through a short set of questions. The sections below follow the flow in order:
- Choose your calculation method
- Confirm your business income
- Add income from outside your business
- Add tax you've already paid
- Finalize and pay
Your state, filing status, and dependents are set in your Tax profile instead. See Update your filing status and dependents below.
Choose your calculation method
The first question asks which approach you'd prefer. Both are permitted under IRS rules, and you can switch any time you review or recalculate.
| Use last year's taxes | Use current-year projections | |
| How it works | Bases your payments on your prior year tax (the IRS safe harbor method) | Bases your payments on this year's actual and projected numbers |
| Your payments | Level and predictable across all four quarters | Follow what you're likely to owe this year |
| Penalty protection | Generally protects you from an underpayment penalty if you meet the safe harbor amount | More penalty risk if your income comes in higher than projected |
| Good fit for | A year that looks similar to last year | A year that looks different from last year, or when last year's return isn't filed yet |
Under current law, the safe harbor generally applies if you pay 100% of last year's total tax, or 110% if your prior year adjusted gross income (AGI, your total income after certain adjustments) was above the higher-income threshold. The threshold is lower if you file as married filing separately, so check IRS.gov for the current figure. If you choose this method, you won't be asked about your income, because the estimate comes from your prior return.
Which method fits depends on your situation. If you're 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 owed so far, tax withheld, and payments recorded.
Confirm your business income
If you chose current-year projections, you'll see the profit we're projecting for your business this year and be asked whether it looks 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 Total profit (revenue minus expenses) field where you can enter your own number.
Enter profit, not revenue. Entering gross revenue will inflate your estimate, often by a wide margin.
After typing a number, select Continue under the box. If you scroll on without selecting Continue, the old figure stays in place and your estimate won't change.
Add income from outside your business
Because this is an individual tax, income from outside your business affects your rate. You'll be asked whether you have any, and answering yes opens follow-up questions about:
- Freelance work reported on a 1099
- Salary from another job reported on a W-2
- Gains from investments you sold
The investment question has two boxes: short-term gains (investments you held a year or less) and long-term gains. Enter your gains, not the total amount you sold.
Anything you enter here is included in the calculation, which makes your effective tax rate more accurate. Anything you leave out isn't, so it's worth completing these even if the amounts are small.
Add tax you've already paid
Two questions reduce what's left to pay this quarter:
- Tax withheld from a paycheck. If an employer takes tax out of your paycheck, answer yes and enter the year-to-date total from your most recent pay stub.
- Payments you've already made. Answering yes opens a short form where you can record a payment without leaving the flow, including 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's the most common reason an estimate looks higher than expected.
A few tips for the withholding question:
- Enter the year-to-date federal and state income tax withheld, not an annual projection. Social Security and Medicare don't count here.
- If you file jointly, include your spouse's year-to-date withholding too. All income and payment questions cover both of you.
- S Corp tier members, your own paycheck counts. Use the year-to-date income tax withheld on your latest pay slip, under Payroll documents. Don't use the "taxes paid" total on the Payroll page, because it includes taxes your business pays as the employer.
Update your filing status and dependents
Your state of residence, filing status, and dependents all affect your tax rate, but they aren't part of the question flow. To update them:
- On the Quarterly payments page, select Tax profile in the top right.
- Update your state of residence and federal filing status. If your state filing status doesn't match your federal one, check My State filing status is different.
- Add any dependents. Each one needs a full name, date of birth, and Social Security number.
- Run Review estimate or Recalculate again. Saving your Tax profile doesn't change your estimate on its own.
See how your estimate was calculated
Select See calculation breakdown at any point to see every figure behind your estimate. After you finalize, select How we calculated this on your estimate. The breakdown shows:
- Your estimate total, split by jurisdiction
- Income, separated into business figures and each category of outside income
- Tax already paid, covering 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, the breakdown is the fastest way to find which input is driving it.
Finalize and pay
- Select Finalize my estimate. It becomes available once every question on the screen has an answer. Your estimate then splits into one card per jurisdiction, each with its own amount, due date, and progress bar.
- Pay each tax authority directly from its card, using Pay at IRS.gov or your state's equivalent. Federal estimated payments use your personal Social Security number, not your business EIN, because this is an individual tax.
- Select Record payment and attach your confirmation under Payment Receipt. The upload is what marks the amount as paid and fills the progress bar.
Collective never debits your account, so every payment starts with you. Nothing syncs automatically from the IRS or your state, so a payment you don't record won't appear in your history.
You can always pay more than your estimate. Record the actual amount you paid, and later quarters will adjust. To change your answers, select Recalculate to go back into the questions.
Why does my estimate look wrong?
- It's higher than expected. Check that you answered the withholding and payments questions. If either shows $0 in the breakdown, your estimate assumes nothing has been paid.
- The projected figure seems far too low. The figure is profit (revenue minus expenses), not revenue.
- It's $0. That's often correct, because withholding and payments you've recorded can cover what you owe. Check the breakdown to confirm all your income is included.
- It's different from last quarter. Each quarter looks at your whole year so far, not only the last three months. With the last year's taxes method, payments stay level and won't follow quarter-to-quarter swings in income.
- You changed a number and nothing happened. Select Continue under the box you typed in.
If you can't pay, or you're paying late
- You missed a deadline. You can still pay, and paying sooner helps. The IRS underpayment penalty works like interest, based on how much you underpaid and for how long.
- You can only pay part of it. Paying part now still lowers any penalty. Record the amount you actually paid.
- You want to pay it all when you file. That's allowed, but you may owe an underpayment penalty and interest. The last year's taxes method is designed to protect you from that.
- You're skipping a quarter. You can close the task by recording a $0 payment for that quarter and tax year. This clears the task in your dashboard, but it doesn't change what you owe.
- Your income dropped. Select Recalculate and use current-year projections so your estimate reflects your new numbers.
For a balance due after you file, see IRS Balance Due Payment Instructions. For questions about penalties in your specific situation, reach out to your Collective team or a tax professional.
Good to know
- Haven't filed last year's return yet? Use current-year projections, which run on this year's numbers only.
- California doesn't have a third-quarter state estimated payment, so your California schedule has three payments instead of four. Check the Franchise Tax Board for current due dates.
- If you moved states this year or owe tax in more than one state, reach out to your Collective team so they can review your situation.
- New York residents: your New York estimate covers New York State income tax only, not New York City or Yonkers resident income tax. When you pay on the New York tax site (Form IT-2105), enter your full Collective amount under New York State and 0 for City of New York, Yonkers and MCTMT, unless you've calculated those separately. New York City's General Corporation Tax (GCT) is a separate business tax that Collective calculates for S Corps doing business in NYC. It's on the Fees and Franchise Taxes tab and should be recorded with the tax type set to Business.
Running it again
You can run Review estimate or Recalculate as many times as you like, and your estimate reflects the most recent run. You don't need to contact us to have it recalculated. Run it again if:
- Your income is materially up or down
- You've added an income stream
- Your filing status or dependents have changed
- 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.