FOUR FIXED DATES. MONEY WITH NO SCHEDULE.
Estimated tax is due on four fixed dates and collections are not. A $5M subcontractor netting 8 percent has roughly $400,000 of taxable income, and at a 30 percent blended rate that is about $120,000 a year, or $30,000 a quarter, leaving the business on dates it does not choose. Two of those dates are the problem: September 15 comes at peak season when working capital is already committed to open jobs, and January 15 comes in the winter trough when collections are slowest. The federal rules give you two ways not to be surprised, a safe harbour and the annualized installment method, and the cash side gives you a third that counts for more, which is funding the liability per invoice and never per quarter.
None of this is a tax position and none of it changes what you owe. It decides whether the money is there on the fifteenth.
WHAT IT MEANS.
Quarterly estimated tax is the federal requirement to pay income tax as it is earned across four installments, due April 15, June 15, September 15 and January 15 of the following year, and for a subcontractor it behaves as four large outflows on dates that have nothing to do with when a general contractor pays.
SPM is not a CPA firm, does not file returns and does not do payroll. This page covers the cash flow consequence of the payment schedule, which is a forecasting problem. Every threshold below is a published federal rule and every judgement about your filing position belongs to your CPA.
FOUR DATES AGAINST A SEASON.
The dates were not written for seasonal work
April 15, June 15, September 15 and January 15. Three of the four fall inside the building season and the fourth falls in the trough. A contractor whose revenue is concentrated between April and October is paying tax on money earned in a season out of an account that is either funding open jobs or waiting out winter.
September 15 competes with your own working capital
Mid-September is when a subcontractor has the most cash committed to open work: material bought, labor run, and pay applications submitted against retainage. That is the moment the third installment is due, and it is due in full whether or not the August pay applications cleared.
January 15 falls in the trough
The fourth installment is due when collections on a season's closing invoices are slowest, retainage on completed work has not released, and northern trades are running fixed overhead against very little revenue. It is the same month a lot of contractors discover their line of credit is doing work it was never sized for.
Profit and cash are on different clocks, and tax follows profit
The liability is calculated on earned income, and the bank account only knows what cleared. A job finished in August is taxable in that year even if the retainage on it releases the following spring. That distance is what makes a profitable year and a tight January the same year.
WHAT IT LOOKS LIKE IN DOLLARS.
Estimated payments are generally required when you expect to owe $1,000 or more for the year beyond what has been withheld. For an owner taking distributions from a pass-through entity, that threshold is cleared early and easily.
The penalty is generally avoided by paying 90 percent of the current year's tax or 100 percent of the prior year's, whichever is smaller. Above $150,000 of prior year adjusted gross income the prior year figure rises to 110 percent. Paying the prior year number is the one that can be budgeted in January, because it is a known figure.
At 8 percent net on $5M, roughly $400,000 of taxable income. At a 30 percent blended rate that is about $120,000 for the year and roughly $30,000 an installment. Both the rate and the split depend on entity and state, which is a CPA's call; the point is the size of the number set against a monthly pay application.
$120,000 a year against $5M of revenue is 2.4 percent of every dollar collected. Moving 2.4 percent of each deposit into a separate account funds all four installments out of the season that produced them, without a decision in September.
The annualized installment method on Form 2210 lets a taxpayer whose income comes in unevenly compute each installment on the income earned by that point in the year and never on a flat quarter. It exists for seasonal businesses, and construction is one.
FUND IT PER INVOICE. NEVER PER QUARTER.
Most 13 week forecasts carry payroll, material and debt service and stop there. The installments belong on the same forecast at the same weight, because they are the same kind of event: a known amount on a known date that does not negotiate.
Take the prior year liability, divide by prior year revenue, and move that percentage out of every deposit the day it clears. The account funds itself in proportion to the work that created the liability, and the September decision disappears because it was made in April.
The annualized installment method has to be applied to a year, and the figures it needs are quarter by quarter income and cost. That is a job costing question before it is a tax question, and books closed monthly can answer it while there is still a quarter left to change.
A credit line sized on average working capital will be short in the month that carries the fourth installment, the winter overhead and the slowest collections at once. The peak draw is what the facility has to cover, and January is usually where the peak is.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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