Yes — and doing it in Q3 is the move that separates owners who finish the year in control from those who open a tax bill in April with no good explanation for the number. A Q3 tax projection is a straightforward estimate of your full-year taxable income and resulting tax liability, built from your actual year-to-date financials. It does not require perfect books or a complex model. It requires current numbers, a few key inputs, and an advisor who knows how to translate the math into decisions you can still make before December 31.
Why does a Q3 tax projection matter so much right now?
July is the best month of the year to run a tax forecast. You have six months of actual performance to work with — enough data to build a credible projection — and you still have six months left to act on what it shows. That window closes fast. By October, many of the most valuable planning moves require lead time that no longer exists.
The IRS does not grade on a curve for business owners who were surprised by their tax bill. Underpayment penalties apply when quarterly estimated payments fall short, regardless of whether the owner knew the number was off. According to IRS guidance, the underpayment penalty for 2026 is calculated based on the federal short-term rate plus three percentage points — a quiet cost that compounds across each quarter where payments were insufficient.
A Q3 projection is how you find out whether you are on track, ahead, or quietly building a problem. It is also how your advisory team identifies the specific decisions — equipment purchases, retirement contributions, owner pay adjustments, timing of income or expenses — that can still move the number before year-end.
A Business Advisory and Accounting Partners business advisor builds this kind of projection as part of the standard mid-year advisory cadence. If that review has not happened yet this year, July is the right time to schedule it.
What goes into a Q3 tax projection for a small business?
Step 1: What do your actual year-to-date financials show?
The projection starts with real numbers, not approximations. Pull your profit and loss statement through June 30 — ideally reconciled and reviewed, not still in draft form. The key figures are gross revenue, total deductible expenses, net profit before owner compensation, and any significant one-time items like equipment purchases, large client payments, or unusual expenses.
If your books are behind or inconsistently reconciled, this is the step that stalls the process. Decision-ready books are not just a compliance convenience — they are the foundation that makes mid-year planning possible. An advisory team that also oversees bookkeeping cadence ensures the data needed for a Q3 projection is ready when the conversation happens, not weeks later.
Step 2: What is your realistic revenue and expense forecast for Q3 and Q4?
A projection is only as useful as its assumptions. The second input is a forward-looking estimate for the remainder of the year: expected revenue based on pipeline, contracted work, or seasonal patterns; anticipated expenses including any planned purchases, hiring, or capital investments; and any known events — a large contract closing, a one-time expense, a distribution — that will materially affect the year-end number.
This does not need to be a spreadsheet built to three decimal places. It needs to be an honest estimate based on what you actually know about your business. Your advisory team will stress-test the assumptions and run the projection under a range of scenarios so you understand the range of outcomes, not just a single point estimate.
Step 3: What deductions and credits are still available to you before year-end?
The projection is most valuable when it surfaces the planning moves that are still on the table. For 2026, that includes permanent 100% bonus depreciation under the One Big Beautiful Bill Act for qualifying equipment placed in service before December 31, the Section 179 expensing limit of $2.5 million, retirement plan contributions for owners and employees, and any remaining estimated payment adjustments needed to cover the projected liability.
According to the AICPA, proactive year-end planning consistently produces better tax outcomes than reactive filing — specifically because the decisions that reduce liability most meaningfully (retirement contributions, equipment timing, compensation adjustments) require lead time that does not exist once the year ends.
Your advisory team will identify which of these levers apply to your specific situation and model the impact of each before recommending action.
Step 4: Are your estimated tax payments aligned with your projected liability?
Once you have a full-year projection, compare it to what you have already paid in estimated taxes for the year. The gap — if there is one — tells you whether you need to increase Q3 or Q4 payments to avoid an underpayment penalty, or whether you have overpaid and can adjust downward to preserve cash flow.
The IRS safe harbor rules provide two primary paths for avoiding underpayment penalties: paying at least 100% of the prior year's tax liability (110% if adjusted gross income exceeded $150,000 in the prior year), or paying at least 90% of the current year's actual liability. A Q3 projection makes it straightforward to determine which path applies and what the required payment amount is.
This is one of the most concrete, immediate benefits of running the projection now rather than waiting: you can align your September estimated payment — due September 15 — with a real number rather than a guess.
Step 5: What decisions does the projection tell you to make before December 31?
The projection is an input to decisions, not an end in itself. Once the numbers are on paper, your advisory team identifies the specific actions still available: accelerating a planned equipment purchase to capture full-year depreciation, making a retirement plan contribution to reduce taxable income, adjusting owner wages for an S-Corp to optimize the QBI deduction, or timing a distribution to manage cash flow and estimated payment needs.
The goal is to finish the year with no surprises — a tax liability you predicted, payments that covered it, and a clear record of the decisions that shaped the outcome. That is what treating your business as your most important investment actually looks like in practice.
[ILLUSTRATIVE EXAMPLE — FICTIONAL]
Hypothetical Business Story (Illustrative Example Only)
This is a fictional example to illustrate how Business Advisory and Accounting Partners would advise a client in this situation.
David owns an IT consulting firm in Tennessee with two employees and just over $850,000 in revenue. He has been running his business as an S-Corp for four years and generally has a sense of where things stand financially — but his tax planning has historically consisted of a year-end conversation with his accountant in late November, after which he adjusts his estimated payments and hopes for the best.
In July 2026, David's books through June showed $390,000 in net profit before his own salary. He had taken $60,000 in owner wages year-to-date and $120,000 in distributions. He had not run a tax projection and was not sure whether his quarterly payments were adequate.
Business Advisory and Accounting Partners would begin by reviewing David's June financials and building a full-year projection based on his pipeline and historical Q3/Q4 revenue patterns. The projection showed a likely year-end net profit in the range of $720,000 to $780,000 before further adjustments — putting his estimated federal and state liability significantly above what his year-to-date payments had covered.
From there, the advisory team would identify three specific moves still available before year-end. First, David had been planning to upgrade his server infrastructure — a $95,000 investment he had been deferring. Accelerating that purchase into 2026 and placing the equipment in service before December 31 would generate a full deduction under permanent 100% bonus depreciation. Second, David's owner salary was underweight relative to a reasonable compensation benchmark for his role, creating both audit exposure and a missed opportunity to optimize his QBI deduction. A mid-year payroll adjustment would address both. Third, setting up a Solo 401(k) for David's S-Corp before the plan establishment deadline would allow retirement contributions that further reduced taxable income.
The result of the Q3 projection conversation: David entered Q4 with a clear action plan, an adjusted September estimated payment, and a projected year-end liability he had actually planned for.
If you see pieces of your own situation in this example, it may be time to sit down with a Business Advisory and Accounting Partners business advisor and run your own Q3 projection.
Why does Business Advisory and Accounting Partners approach Q3 planning differently?
Business Advisory and Accounting Partners, powered by Harness, treats the Q3 projection as a standard part of the advisory cadence — not an optional service or a reactive response to a problem that has already developed. The projection is a planning tool, and planning tools are only useful when used with enough lead time to act on what they show.
The firm's commercial banking background gives its advisory team a particular fluency with cash flow forecasting and the interaction between tax strategy and business financing. That perspective matters when the projection surfaces decisions — like equipment timing or retirement plan design — that have implications beyond just the tax bill.
Any firm can file what happened. This firm helps you plan what comes next — and July is when that conversation produces the most value.
What happens when you meet with a Business Advisory and Accounting Partners business advisor?
A Q3 advisory conversation at Business Advisory and Accounting Partners is a working session built around your actual numbers. You will walk through your year-to-date financials, your revenue and expense forecast for the remainder of the year, and your current estimated payment position. You will leave with a full-year tax projection, a clear picture of the decisions still available before December 31, and a calibrated estimated payment amount for Q3 and Q4.
It is a professional, educational conversation with no obligation to move forward beyond the meeting. The goal is clarity — on your numbers, your options, and your next step.
| If you want a Q3 tax projection built around your actual business numbers, schedule time with a Business Advisory and Accounting Partners powered by Harness business advisor today. |
Book your advisory fit conversation at: https://busadvisory.com/schedule-your-advisory-fit-meeting/
A quarterly tax projection is an estimate of your full-year taxable income and resulting tax liability, built from your actual year-to-date financials combined with a realistic forecast for the remainder of the year. It identifies whether your estimated payments are on track, surfaces deductions and planning moves still available before year-end, and gives you a number to plan around rather than discover. A business advisor builds the projection using your current profit and loss data, your income and expense outlook, and the specific tax provisions that apply to your situation.
Q3 — specifically July — gives you the best combination of real data and remaining runway. You have six months of actual performance to build a credible estimate, and you still have six months left to act on what the projection shows. Most of the planning moves that meaningfully reduce year-end liability — retirement contributions, equipment purchases, owner pay adjustments — require lead time that disappears after October. By the time a surprise tax bill arrives in April, the decisions that would have changed it were made months earlier.
The IRS provides two primary safe harbors for avoiding underpayment penalties. The first is paying at least 100% of the prior year's total tax liability across your four quarterly payments (110% if your prior-year adjusted gross income exceeded $150,000). The second is paying at least 90% of your current year's actual liability. A Q3 projection makes it straightforward to determine which path you are on and whether your September payment needs to be adjusted to stay inside the safe harbor.
A basic projection is something many owners can sketch out — multiply estimated net profit by an approximate effective tax rate and compare it to payments made. But the projection is most valuable when it surfaces the planning decisions still available to you, models the impact of specific moves like equipment purchases or retirement contributions, and factors in entity-specific considerations like S-Corp reasonable compensation and QBI deduction optimization. That analysis requires more than arithmetic — it requires someone who knows both the tax rules and your specific situation.
Several meaningful moves remain available after a Q3 review, depending on your situation: accelerating a planned equipment purchase to capture full depreciation under the OBBBA's permanent 100% bonus depreciation, making retirement plan contributions as an owner or employer, adjusting S-Corp owner wages to optimize the QBI deduction, timing distributions to manage cash flow and estimated payment needs, and reviewing any deferred expenses that can be accelerated into the current year. Business Advisory and Accounting Partners will identify which of these apply to your specific projection.
July is the right month — early enough that you have real data and enough runway to act on what the projection shows. Business Advisory and Accounting Partners builds Q3 reviews into the advisory cadence for clients and offers initial projection conversations for business owners who want to understand where they stand. Schedule a conversation at https://busadvisory.com/schedule-your-advisory-fit-meeting/
