For many people, tax season ends the moment the return is filed. But the smartest approach is to treat that filing as a weather report from last year. A tax projection, on the other hand, is the financial weather forecast for the year ahead. It uses what we know now to predict the conditions to come, giving you time to put on sunscreen or find an umbrella before you get caught in a storm.
What a Tax Projection Involves
Every projection starts with your most recent return as the foundation. From there, your CPA makes adjustments based on what's likely to happen in the year ahead. You might be looking at a raise, a bonus, or a change in business income. Life events like marriage, the birth of a child, or buying a home can shift your tax picture, as can new deductions or credits such as charitable giving, education expenses, or an electric vehicle purchase.
In many cases, IRS tools like the Tax Withholding Estimator or Form 1040-ES worksheets play a role in refining the numbers. These resources help pinpoint whether you should change your withholdings or make estimated payments to keep your taxes on track.
Why Projections Matter
A tax projection is your best defense against that sinking feeling in the pit of your stomach when you realize you owe thousands more than you expected. Knowing where you stand months in advance transforms anxiety into a manageable plan. It allows you to make calm, strategic moves instead of scrambling in panic come April.
Projections also help you stay compliant with IRS safe-harbor rules. In most cases, that means covering at least 90% of your current-year tax or 100% of your prior-year tax to avoid penalties. For higher-income taxpayers, the safe-harbor percentage can increase to 110%.
Perhaps most importantly, a projection gives you a window to make strategic moves before December 31. You might increase retirement contributions, prepay deductible expenses, or shift the timing of income to reduce your liability.
How a Projection Fits into Your Bigger Financial Picture
Tax forecasting does more than keep you out of trouble with the IRS. It can:
- Help you work tax payments into your budget and smooth out cash flow
- Guide decisions on when to sell investments or realize losses
- Show opportunities to boost retirement contributions before year-end
- For business owners, inform plans for deductions under Section 199A or the timing of major purchases
Getting Started
If you've never done a tax projection before, start with your most recent tax return and make a note of any changes you expect this year. Keep organized records of income and deductible expenses as they occur. And rather than waiting until next spring, consider booking a mid-year or fall review with your CPA. Meeting before year-end leaves you with time to act on the insights you uncover.
FAQs
Do I still need a projection if I usually get a refund?
Yes. You might be over-withholding, which means your money is tied up with the IRS until you file.
How often should I do a projection?
At least once a year, and more often if your income or deductions change significantly.
Can a projection lower my taxes?
Often, yes. It can highlight ways to shift income or increase deductions before December 31.
How Myrick CPA Can Help
At Myrick CPA, we work with clients in Washington, D.C., and across the country through secure online meetings. We take a close look at your past return, your expected changes, and your financial goals, then create a forecast you can use to plan ahead. This approach helps you avoid last-minute stress, stay compliant, and make smarter financial decisions year-round.
Ready to see where you stand? Schedule a projection session through our secure client portal and take control of your next tax season.
