How to Estimate Your 2026 Tax Liability Before the Year Ends

Ask a business owner how the year is going, and most can give you a decent answer on revenue and profit. Ask what that means for their tax bill, and you often get a shrug. This is where people get into trouble.



If you wait for the books to close and the return to be prepared, there's not much left to change. The income is in, the equipment is bought, and the cash is spent on something else.

You don't have to predict every number to get a useful 2026 estimate. A reasonable picture of where the year is heading will do.

Start With What The Business Has Earned So Far

I go to this year's numbers first, not last year's return. Print or pull up your current profit and loss statement and read revenue, operating expenses, and net profit through the most recent month you have. Everything else builds on that.

Last year's return goes stale quickly. Maybe sales jumped, or margins got thinner. Maybe you hired a few people, signed a bigger lease, or had one quarter that was far better than the rest.



Whatever happened, the estimate should describe the business you have today, and a twelve-month-old version of it won't do that.

Guess At The Last Few Months

Now look at the rest of the year.

• What do you realistically expect between now and December 31?
• Will sales hold steady?
• Do you have contracts already booked?
• Is your business seasonal?
• Will payroll or other costs go up?

A perfect forecast isn't the goal, just an honest one based on what you know. Say you're sitting at $500,000 in profit late in the year and you expect another $100,000 by December 31. That's a very different tax situation from a year where you expect to end at $525,000.

Count The Money Outside The Business

Your business income is only part of what the IRS looks at. Sole proprietors, partners, and S corporation owners all report that income on their own personal returns, so it gets mixed in with everything else: wages, withholding, deductions, credits, and any other taxes on the return. The final number comes from all of it together.



That's why I don't estimate a client's taxes from the business numbers alone. If there's a spouse with a paycheck, rental or investment income, a 401(k) or IRA contribution, or a big charitable gift, I want to see it, because each one can move taxable income up or down.

Subtract What You've Already Paid

Once you have a projected liability, compare it with what's already been paid. That means estimated tax payments plus any withholding.



Owners often find at this step that their payments were built on assumptions that stopped being true months ago. The IRS itself recommends recalculating your estimated tax when income or circumstances change, since the first number isn't meant to be permanent.

Zero isn't necessarily the target. What you want to learn is whether you're roughly on track, well behind, or paying in more than you need to.

A Client Example

One business owner I worked with had a far better year than expected. Their estimated payments were based mostly on the prior year, which made sense in January. By fall the company had made a lot more profit than that.



We reran everything with actual year-to-date results and a sensible projection for the final months. They did end up owing more, but that wasn't the most useful finding. The timing was. Because we knew before year-end, they had room to plan for cash reserves, upcoming purchases, and retirement contributions, rather than opening a surprise bill after the year had closed.

Knowing your liability and planning around it are two separate things, and this was the second one.

Use The Estimate When You Make Decisions

Once you have the number, use it. Before you commit to new equipment, a hire, a larger retirement contribution, or a bigger draw from the business, find out what it does to your projected tax bill. It takes a few minutes, and it's a lot cheaper than learning the answer in April.



I'm not suggesting you make decisions only to lower your taxes. I've never thought that was a smart way to run a company. Look at the tax effect next to the effects on cash flow, profit, and day-to-day operations. Some good decisions come with a tax benefit. Others come with a tax cost that is completely fine, because the move itself is worth making.

Get A Number Before December 31

Your 2026 estimate doesn't need to be exact to help. Start with year-to-date profit, project the remaining months from what you know, add in other income, deductions, credits, and what you've already paid, then look at which decisions are still open before the year ends.

At Straight Talk CPAs, this is where I think good financial visibility earns its keep. The numbers do more than tell you what happened. They give you something to base the next decision on.

If you haven't put a number on your 2026 taxes yet, now is a good time. You can't control every dollar you owe, but you'll make better calls once you know where you stand.

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