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Estimated Tax Percentage
Estimated Tax Percentage

What are estimated taxes? How to use estimated tax percentage?

Yzza avatar
Written by Yzza
Updated over 4 years ago

Estimated taxes are taxes paid on income that is not subject to withholding. In other words, any income that hasn’t already had taxes automatically deducted.

  • If you’re someone else’s employee and get regular checks, you’ll notice that a portion of your wages is taken out or withheld for taxes. That means your employer has done the work for you: Figured out your taxes and sent them along to the IRS in your name. I can appreciate that now, but I still remember getting my first paycheck when I was in high school and thinking my boss ripped me off. I learned about taxes pretty early on.

  • If you’re self-employed though, it’s unlikely that you withhold money every time you pay yourself. Similarly, if you’re a contractor, your earnings typically won’t have any taxes withheld. That’s where estimated taxes come in.

Estimated Tax % is a placeholder in LessAccounting to just estimate the cash outflow projected based on amount of profit for the period. The actual % of effective tax rate is based on income levels and the state where business is located.

Please check your last year's tax return to get a general estimate of Tax % or ask your Tax Accountant to give you an estimate of tax % to be used.

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