Q3 Tax Planning: What You Should Do Before September 15
The Q3 estimated tax deadline on September 15 is more than just a compliance date, it’s a strategic opportunity to shape your year-end tax outcome. For small business owners in Texas, especially those with variable income or seasonal sales, Q3 is the make-or-break moment to course-correct.
What You Should Do Now
1. Adjust Estimates Based on New Deductions
Recent legislation has introduced temporary deductions for tip income, overtime pay, and U.S.-assembled vehicle loan interest. These are not auto-applied by tax software. You must proactively identify and document qualifying income or expenses. For example, an Allen-based catering company reduced its Q3 estimated payment by over $4,000 by accurately isolating overtime payroll data.
2. Compare Year-to-Date Revenue to Annual Projections
Have your sales outpaced your expectations this summer? It’s essential to re-forecast your annual net income and adjust your remaining tax estimates accordingly. Underpaying by more than 10% can trigger IRS penalties, even if you pay in full by April.
3. Revisit Payroll Withholdings and Owner Salaries
S-corp owners: Is your salary still considered “reasonable” based on year-to-date business performance? A salary adjustment may be necessary to maintain compliance with IRS scrutiny on S-corp compensation. At Hill Durnin, we run midyear salary recalculations based on industry benchmarks and profitability metrics.
4. Catch Up on Bookkeeping and Reconciliation
If you’re using QuickBooks or another cloud accounting tool, now is the time to reconcile bank accounts, match revenue to invoices, and recode any expenses misclassified earlier in the year. Clean books ensure more accurate tax estimates and position you for a smoother year-end close.
5. Consider Prepaying Certain Expenses
Cash-basis taxpayers can prepay deductible expenses, like insurance or rent, for the remainder of the year to reduce taxable income. Just ensure the prepayments are ordinary and necessary, and stay within the IRS’s 12-month rule.
Let’s schedule a Q3 tax check-in now to identify strategic moves, reduce surprises, and keep your business tax-efficient.