Most people find out what they owe in taxes when their preparer finishes their return in March or April. By that point, every planning window has closed. A tax projection is how you find out what you owe in October, while there’s still time to do something about it.

What a Tax Projection Is

A tax projection is an estimate of your full-year tax liability calculated before the year ends. It’s built from what’s actually happened — income earned, deductions paid, withholding made — combined with a reasonable estimate of what will happen through December 31.

It’s not a guess. It’s a calculated estimate using your real numbers: W-2 income, business income year-to-date, investment gains realized, retirement distributions, and any other taxable events. Your tax advisor runs those numbers through the current year’s tax brackets, credits, and deductions to arrive at an estimated tax due.

The difference between a projection and your actual return is just the last few months of the year — and the planning you do in those months.

What a Projection Reveals

The purpose of a projection isn’t just to know the number. It’s to identify opportunities before they expire. A projection answers specific questions:

Are you underpaying estimated taxes? If your estimated tax payments or withholding won’t cover at least 90% of this year’s liability (or 100% of last year’s, whichever is lower), you may owe a penalty. A projection tells you whether a catch-up payment before January 15 makes sense.

Is your income higher or lower than expected? A higher-than-expected year might make retirement contributions or charitable giving more valuable this year. A lower-than-expected year might be an opportunity for a Roth conversion or capital gains harvesting at a lower rate.

Will you hit a meaningful threshold? Certain deductions, credits, and surcharges phase in or out at specific income levels. Medicare’s IRMAA surcharge, the net investment income tax, the QBI deduction phase-out, the child tax credit phase-out — these are all income-sensitive. A projection tells you where you land relative to those thresholds and whether adjusting your income makes a measurable difference.

Are there deductions you haven’t yet made? Retirement contributions, charitable gifts, and HSA contributions all need to happen before year-end to count for this year. A projection shows whether making those contributions would drop you into a lower bracket, phase you into a credit, or eliminate a surcharge.

The December Deadline

Almost every year-end tax strategy has a December 31 deadline. Charitable contributions, retirement plan contributions for 401(k)s and SIMPLE IRAs, business purchases qualifying for Section 179 or bonus depreciation — all must happen by December 31. Some require decisions even earlier, like establishing a new retirement plan.

A projection in October or early November gives you six to eight weeks to act on what you find. A projection in late December gives you days. Many advisors won’t take on year-end rush work after mid-December because there’s simply not enough time to implement anything.

Who Needs a Projection Most

Not every taxpayer needs a formal projection every year. But you should get one if:

Your income changed significantly from last year. A new job, a raise, a promotion, a business that grew or contracted, a spouse who went back to work or left — any of these can shift your tax bracket substantially.

You had a one-time income event. Sold property, received a large bonus, exercised stock options, took an IRA distribution, had a business sale — these can move your income into territory your withholding wasn’t set up to handle.

You’re planning a major year-end transaction. Selling appreciated stock, making a large charitable gift, or purchasing business equipment are all decisions that should be made with a current projection in hand.

You’re in a year where tax law is changing. Provisions expiring, new credits taking effect, or rates adjusting are all reasons to know your actual position before year-end rather than guessing.

What Your Advisor Needs From You

A projection is only as accurate as the inputs. To get a useful one, you typically need to provide:

Income year-to-date, broken down by source (wages, self-employment, rental, investment, retirement distributions)

Any income events that haven’t yet happened but will before December 31 (a bonus, a property sale, a scheduled distribution)

Current withholding and estimated tax payments already made

Any large deductions paid or planned (charitable, mortgage interest, property taxes, business expenses)

Your best estimate of income for the remainder of the year if it’s variable

The more complete the picture, the more accurate the projection — and the more useful the planning that follows.

Frequently Asked Questions

Q: How is a tax projection different from just looking at last year’s return?

A: Last year’s return shows what you owed under last year’s circumstances. A projection uses this year’s actual data. Your income, deductions, credits, and tax law may all be different. Last year’s return is a starting point at best; it’s not a projection.

Q: What does a projection cost?

A: This varies by advisor and complexity. Some firms include basic projections as part of their ongoing service. Others charge hourly or a flat fee. The cost is typically small relative to the planning decisions it informs.

Q: Can I do a projection myself?

A: Rough projections are possible using IRS withholding calculators or tax software, particularly for simple returns. For business owners, investors, or anyone with multiple income sources and planning variables, a professional projection is worth the time — the interaction between brackets, phase-outs, self-employment tax, and deductions is genuinely complex.

A tax projection is the only tool that tells you what your options actually are before the year ends. Without one, you’re making decisions blind. With one, you’re making decisions with a specific number in front of you — and that’s when planning actually works.

If you’d like to apply this to your situation, the team at Molen & Associates is here to help. Schedule a consultation at molentax.com.