If you wait until tax season to find out what you owe, you are already out of time to make many of the decisions that could have affected your tax bill.

That is where a tax projection comes in.

A tax projection gives you an estimate of what your tax situation could look like before the year is over. Instead of looking backward at what already happened, you are looking forward and asking, “Based on what we know today, where are my taxes headed?”

For business owners, self-employed individuals, and anyone whose income changes throughout the year, that information can be extremely valuable.

What Is a Tax Projection?

A tax projection is an estimate of your expected tax liability for the current tax year.

Your CPA looks at the income, deductions, credits, withholding, estimated tax payments, and other information available so far and then projects what the rest of the year may look like.

The goal is not to predict your tax return down to the last dollar.

The goal is to get close enough to make informed decisions before December 31.

The IRS itself uses projected income, deductions, credits, withholding, and other information when calculating estimated tax.

Think of it as a financial snapshot of where your tax return is heading.

What Does a Tax Projection Look At?

A good tax projection is more than taking last year's tax bill and adding a percentage.

Your circumstances may have changed significantly since your last return.

A projection may consider things such as:

• Current year income

• Expected income for the remainder of the year

• Business profit or loss

• W-2 wages

• Self-employment income

• Investment income

• Rental income

• Capital gains

• Estimated tax payments

• Federal tax withholding

• Business expenses

• Potential deductions

• Tax credits

• Retirement contributions

• Changes in your filing situation

• Major purchases or financial transactions

For business owners, your current bookkeeping becomes especially important.

If your books are behind or your income and expenses are not being tracked accurately, your tax projection is going to be working with incomplete information.

That is one reason clean books matter throughout the year, not just when tax season arrives.

Why Should You Get a Tax Projection?

Because December 31 comes whether you are ready or not.

Once the year is over, many tax planning opportunities are gone.

A tax projection gives you information while there is still time to make decisions.

For example, maybe your business is having a much stronger year than expected.

That sounds great.

But if your income is significantly higher, your tax liability may be higher too. You may need to adjust your estimated payments or consider other planning opportunities before year-end.

On the other hand, maybe your income dropped significantly.

Your previous estimated tax payments may no longer line up with your actual situation.

A projection can help identify that before you continue sending in payments based on outdated assumptions.

The IRS notes that estimated taxes are generally used when income is not subject to enough withholding, including income from self-employment, investments, rent, and certain other sources.

A Tax Projection Can Help You Avoid a Tax Surprise

Nobody likes finding out they owe a large amount of money after the year is already over.

A tax projection does not eliminate the possibility of owing money, but it can make the number much less surprising.

For example, if your projection shows that you may owe $20,000 when you file, that is information you want in September or October.

Not April.

Knowing earlier gives you time to plan for the cash.

It may also give you an opportunity to review your estimated payments and determine whether additional payments are needed.

For 2026, the IRS lists September 15 as the due date for the third estimated tax installment for individuals.

That makes early fall a particularly useful time to look at where your tax liability is headed.

A Projection Can Also Help You Make Better Business Decisions

Tax planning should not happen in isolation from the rest of your business.

Let's say you are considering:

• Buying equipment

• Hiring another employee

• Increasing payroll

• Making a retirement contribution

• Selling an asset

• Taking money out of the business

• Changing your business structure

• Making a large business purchase

You may want to know how that decision could affect your tax situation before you make it.

That does not mean you should make a business decision solely because of the tax deduction.

A tax deduction is not a reason to spend money you did not need to spend.

But taxes are one part of the overall financial picture, and knowing the potential tax impact can help you make a more informed decision.

What If Your Income Changes During the Year?

This is one of the biggest reasons a tax projection can be useful.

Your income does not always follow a predictable schedule.

You may have a business that has an unusually strong quarter. You might receive a large bonus. You could sell an investment or property. Your spouse may start a new job. Your business expenses may change.

The IRS recommends checking withholding when your financial circumstances change because those changes can affect your tax liability.

A tax projection gives you a way to look at those changes as part of the bigger picture.

Instead of asking, “Why do I suddenly owe so much?”

You can ask, “What changed, and what should we do about it?”

That is a much better conversation to have.

Is a Tax Projection the Same as Your Tax Return?

No.

A tax return looks backward.

It reports what actually happened during the tax year.

A tax projection looks forward.

It uses the information available today to estimate what may happen when you file.

Your projection can change as the year continues.

That is completely normal.

If your business earns more than expected in October or you make a significant financial decision in November, the projection may need to be updated.

The goal is to keep the estimate useful as your financial picture changes.

When Should You Get a Tax Projection?

There is no single perfect date for everyone.

But waiting until the end of the year defeats much of the purpose.

For many taxpayers and business owners, early fall is a good time to review the numbers.

You have enough of the year behind you to make a more meaningful estimate, while there is still time to make certain year-end decisions.

You may also want a projection when:

• Your income has changed significantly

• Your business is growing quickly

• You had a large gain or sale

• You started or sold a business

• Your spouse's income changed

• You received a large bonus

• Your estimated payments may be too low or too high

• You are considering a major purchase

• You are considering retirement contributions

• You want to understand your potential year-end tax bill

What Should You Bring to Your CPA?

The more accurate the information going into the projection, the more useful the result will be.

Depending on your situation, your CPA may need:

• Current-year profit and loss information

• Year-to-date bookkeeping

• Recent pay stubs

• Estimated tax payment records

• Investment information

• Records of major purchases or sales

• Information about retirement contributions

• Changes to your family or filing situation

• Other income received during the year

• Any major financial changes you expect before December 31

For business owners, this is another reason I always encourage keeping your books current.

You should not have to reconstruct your entire year in December just