Tax planning is the process by which we make sure you are paying the right amount of taxes at the right frequency. Why? If you own your own business, you need to manage your tax liability, which means not paying too little, of course, but not paying too much either. Mostly we want to make sure you avoid unnecessary penalties and interest payments that can be very costly if the projections are not correct. No one likes that.

  • Too little too late: The federal and state governments can assess late charges, and you’re stuck with a large tax bill come filing time.
  • Too much too early: You’re lending the government money that you could spend elsewhere (on equipment, growth, raises, etc.). Note: They don’t pay you interest on your ‘loans’ to them.

When you own your own company, you must pay your income tax like everyone else, of course. But you may want to recalculate the estimated taxes and the amount you will owe at the end of the tax year because of the fluctuations in your income. If you’re having a “good” year, you will owe more money come April 15.

For that reason, some business owners schedule tax planning sessions with their accountant twice a year. Some do it quarterly. Here’s why:

  • You need to be ‘penalty proof’ (explained below).
  • You need to have enough money put away for when the final tax bill is due!
  • You may be paying too much and stifling cash-flow when you need it to stay afloat or to grow.

So, how do you know if you should do tax planning  more frequently? And how often is enough?

We Answer Five Questions about Tax Planning

These questions have come in from our clients, and we hope that by answering them, we are helping you to decide if you need to change the frequency of your tax planning. 

Is there a dollar income figure for income that indicates I need to look at my tax projections more frequently than I have been?

  1. What are some indicators that I need to talk to my tax planner more frequently?
  2. What happens if I’m “way off” on my estimated tax payments?
  3. How is a tax planning/projection appointment handled?
  4. Can I  pay too much in estimated taxes?

 Q #1. Is there an income dollar figure where I should consider increasing my tax planning frequency?

  1. It would be nice to say: Okay, if you’re making $500,000 a year, then it would be best if you met with an accountant twice a year. Or if you’re making $1,000,000, then quarterly meetings. However, it’s not that simple. The amount is not as important as the industry you are in, or perhaps the cyclical or unpredictable nature of your sales across the year.

 Here’s an example: if you make $75,000 in the first quarter and $200,000 in the second, third, and fourth quarters ($675,000 for the year), you will have grossly underpaid the final tax bill if you base it off the first quarter! If the entire year’s earnings are $75,000 for every quarter ($300,000 for the year), your estimates would be correct, and you would be fine. 

 Q #2.  What are some indicators I might need a change in my tax planning frequency?

  1. For business owners, an increase in revenue with a corresponding boost in profits means a quick tax planning meeting and review with your accountant might make sense. Here’s the good news: You can change your estimated tax payments up or down. (It’s better to keep the payments even. However, if you’re showing the government your intent is to pay the correct amount, then you might want to consider adjusting the estimated payments.)

Q # 3. What happens if I’m way off on my estimated payments?

  1. If your withholdings have been way too low all year long, then, for one thing, you may be in for a huge payment when it comes to filing your tax return. Hopefully, you have money in your bank account to pay your federal and state taxes that are due on April 15. Or you’ll find yourself draining your vacation savings account, and everyone’s mad at you.

The bigger problem is the penalties you will pay if you’re too low. If you have not paid the correct amount in estimated tax payments, then you must pay what you owe, plus a penalty. The penalty amount you will be assessed is based on how much you’re below the correct amount, and how long you have owed it. The usual penalty is 0.5 percent of the total amount you owe calculated for each month you have not paid it [Source: Bankrate]. This is  the reason we want to make accurate estimated tax payments, and is what we talk about when we try to keep you “penalty-proof.”

Taxpayers who have underpaid are not always penalized. For example, while you must pay the full amount of taxes you owe, the penalty is waived if 1) the total tax is under  $1,000, 2) you did not owe taxes the previous year, 3) you paid at least 90 percent of what you owe, or 4) the unpaid taxes amount to less than $1,000 [Source: IRS]. Penalties are also absolved if the underpayment was because of special occurrences, such as a natural disaster.

Q # 4. What happens at a tax planning/projection appointment?

  1. Tax planning appointments can take place over the phone. If your CPA has your records, he or she will ask if you expect your revenues and expenses (or your income if you’re a contractor or sales rep) to stay the same for the rest of the year. Then, they calculate your expected tax liability and help ensure that you get the proper forms to submit estimated tax payments or have your withholding changed if needed.

 The best strategy is to tax-plan frequently enough to ensure you are not underpaying, and therefore to keep you “penalty-proof.” The sooner you catch an underpayment, the quicker you can start saving to pay the larger amount due in April, but also ratchet up your estimated payments if there are any left in the year.  You may be able to change your payment mid-year, showing good faith if you’re underpaid. Check with your accountant.

If you’re looking to obtain a loan from a bank, it’s best to let them see that you do tax planning frequently. They will be assured that you should not have a huge surprise payment due on April 15.

Q # 5. Can I pay too much in estimated taxes?

  1. Almost everyone likes to get money back if they’ve overpaid on their taxes, whether they have normal withholding from their paycheck, or if they’re paying estimated taxes. However, that money sits with the government without earning you interest or returns from savings or investments, for instance.

 If you’re a business owner, that money could have been used to expand the business, buy new equipment, or pay bills that might be past due. It’s not a good idea to reduce your estimated taxes without justification, but that is another argument for doing tax planning and projections more often.


Tax planning is especially crucial for business owners, but for anyone who pays taxes, actually. Because the government likes to have a steady inflow of funds to pay its bills (just like families), they require that individuals and companies pay on a regular, consistent basis. When they don’t get their money, they’re not pleasant, and we like to help people avoid these events.

 The best strategy is to find the proper frequency by checking with your accountant or CPA to ensure you’re on the right schedule. Mostly, you do not want to pay any penalties, which with interest charges, can be very costly.

A tax planning appointment is an inexpensive form of insurance and just plain good business. Plus, accountants like to check in with you to see how your kids are doing, where you’re going on vacation, and to tell you about their kids.

Please contact us here if you have questions about tax planning or need help with your tax projections.


The tax laws change from time to time, and the above information cannot be used to support a legal argument in a court of law. It is intended as a guideline, a way to answer questions our clients have asked us, and as a motivation for taxpayers to stay current with the latest tax laws.


Mike Agresti

Practicing since 1998, Michael decided to focus his practice on high net worth tax clients and closely held companies at LSL CPAs because of the complexity and multiple advisory needs. He not only provides tax planning and reporting, but he also consults on business strategic planning and has represented clients before tax authorities. He enjoys being available to clients for any business or personal financial questions. You can reach Mike at 714-672-0022. Read Mike's complete bio.