Tiller’s Quarterly Tax Estimator sheet works by pulling in your transaction data for business income and expenses. It requires that you tag expense and income categories as “Business” on the Categories sheet in order for them to be factored into the tax estimation calculations.
The sheet uses your transaction data plus any optional manual adjustments you make and calculates a “net profit” by subtracting your business expenses from your business income. The net profit is ingested into the calculation engine that’s running in the hidden cells to the right of the main dashboard area.
Using the net profit amount, the engine calculates your self-employment tax and additional medicare tax (if applicable based on your net profit). It also calculates your regular federal tax (on an annualized basis) based on where your taxable income currently falls (i.e. year to date) in the tax brackets for your filing status and the selected year. As the year progresses, and your profit increases, your regular federal tax total will change as you progress through the tax bracket.
Understanding the Sections on the Estimated Quarterly Tax sheet
At the top of the Estimated Quarterly Tax sheet you have options to configure the sheet based on your tax situation. You also get a summary of when the next tax payment is due and the estimates for state and federal that would be owed on the specified date.
At the top you also get a graph of quarterly net profit versus estimated tax due to help you visualize your tax payments in comparison to your profits.
To the right of the Quarterly Net Profit vs Estimated Tax chart there is a Scratch/Notes area where you can add notes and do manual calculations to help you stay organized.
Net Profit & Estimated Tax Detail by Quarter
The Net Profit & Estimated Tax Detail by Quarter area offers a quick view into your quarterly earnings, spending, net profit, and estimated taxes. It also includes helpful reminders of reporting period date ranges and payment due dates.
The date ranges are based on tax reporting quarters for the IRS, not the normal quarterly date ranges for a calendar year. (i.e. Q2 is a two month quarter, whereas Q4 is a four month quarter.)
Income & Expense from Transactions
The Income & Expense from Transactions gives you a summary of your business income and expenses based on categorized data in the Transactions sheet. It’s pulling in the income and expense totals for any transactions that are categorized using categories tagged as “Business” in the Tags column on the Categories sheet.
Profit & Tax Payments Summary
The Profit and Tax Payments Summary area gives you a quick view of your quarterly net profit and estimated tax payments. The estimated tax payments are broken down by cumulative quarterly total, estimated federal and state payments, and the tax payments you’ve already made.
Business Income/Expense Category Detail by Quarter
At the bottom of the Estimated Quarterly Tax sheet you’ll see a breakdown of your spending and earnings organized by type (income vs expense), group, and category for categories that are tagged as “Business” on the Categories sheet. This table is a useful reference to help you visualize your quarterly figures for business specific categories. The first business income category listed is highlighted in green and the first business expense category is highlighted in red to help you quickly delineate where your income and expense categories start and stop.
Using the Hidden Grouped Adjustment Area
Starting at row 28 a group of rows is hidden by default that offer other adjustments you can make to fine tune your estimates.
Making Adjustments to Net Profit
Out of the box you get an estimate of taxes owed as your data flows in, but if you need to make other adjustments to your business income or expenses you can add these using a group of hidden rows starting at row 28 in the dashboard.
Click the + next to row 28 to unhide the manual adjustments area.
Manual Income/Expense Adjustments
These light green fields enable easy adjustments to income and/or expense by quarter. For example, if you accidentally put $1,000 of business expenses on your personal credit card, you could add -$1,000 to the Expense Adjustment line to ensure that cost is included.
Expenses should be entered as negative values (-1000) and income should be entered as positive values (1000). You may need to do some offline calculations to get the totals for income and expense adjustments that should be used here. Use the scratchpad/notes area at the top to keep track of or make calculations for manual adjustments.
Note: the adjustment cells should only be used for business income and expenses that affect net profit to help calculate self employment tax owed.
You can also use these cells for forecasting your estimated quarterly payments if you have a good idea of how much you will earn per quarter.
Home office expenses can also reduce your net profit. Some expenses are applicable to reduce this net profit amount by a percentage calculated based on the square footage of your office compared to your entire home. Other expenses are applicable at 100%. Consult with your tax advisor or accountant to determine which expenses are applicable, and whether they’re applicable at 100% or at a prorated amount.
Adding home office adjustments
- Enter the square footage of your home office and the square footage of your entire home or apartment.
- Enter the quarterly amount for rent or mortgage interest for the entire property for each quarter.
- Enter in other home office related expenses that should also be prorated such as utilities, property taxes, or home/renters insurance.
- Enter in any expenses related to home office that should be included at 100% such as a home office remodel.
Note: all expenses should be entered in as negative values.
You can also adjust your net profit mileage associated with business related travel. The sheet automatically calculates the dollar amount for you using the IRS’s standard rate for the tax year based on the mileage entered.
- Enter in your total mileage per quarter into the “Business Vehicle Mileage” line on the Estimated Tax sheet
If you prefer to itemize your business vehicle expenses do not enter in your mileage for business related travel into the Business Mileage adjustment area. Instead use the “Business” tag for those categories and these expenses will be factored into the net profit calculation automatically. For accuracy, it is important to choose one or the other approach, but not both.
The Estimated Quarterly Tax sheet defaults to using the standard deduction based on your filing status to calculate your quarterly estimated tax payments. Consult with your tax advisor or accountant on whether you should use the standard deduction or an itemized deduction amount for your quarterly estimated payment calculation.
If you wish to use an itemized deduction amount instead:
- Unhide the columns on the right half of the dashboard by clicking the small arrow to the right of Column L in the column header area.
- Change the “Deductible Type (Standard/Itemized)” to “Itemized”
- Manually enter an itemized deduction amount in the row below. As with the standard deduction, your itemized deduction will be applied in a prorated fashion.