By Hunt Demarest, CPA, Host of Business by the Numbers Podcast
Running an auto repair shop means riding seasonal waves—from a slow New Year’s thaw to full-throttle summers. Waiting until April 15 to see your tax bill? That’s like driving blind into rush hour. Instead, break your estimated payments into four checkpoints, and use real performance data each quarter to steer your cash flow smoothly.
Q1: A Placeholder, Not a Promise
Your first estimate (due April 15) is based on just three months of results—often too thin for precision. If you’ve earned $30,000 through March, you’d annualize to $120K; $60K becomes $240K. That small sample can swing wildly, so treat Q1 as a placeholder and avoid drastic changes. Hunt doesn’t recommend trimming or padding this payment—there are simply too many unknowns this early in the year .
Personal Comfort & Cash-Flow Preference
“Hun, should I pay extra to the IRS or hang onto cash?” Hunt’s answer is always: it depends on you. If you sleep better knowing you’ve overpaid a few thousand, share that with your CPA—there’s no shame in a small cushion. If you trust yourself to set aside funds for April’s bill, you can hold back. Either way, be realistic: if you tend to spend what you’ve got, guard against under-estimating and lock in your estimates early .
Q2 & Q3: Heavy-Lifting Season
Due June 15 and September 15, these payments land smack in the middle of busy season. By now you’ve got six to eight months of financials—fewer variables, clearer trends. Hunt’s playbook:
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Compare Forecast vs. Reality: If your CPA projected $15K per quarter but you’re consistently hitting $17K, bump up the next estimate.
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Stay Conservative: “It’s better to owe $18K instead of $20K than $22K instead of $20K,” Hunt says—small overpayments are a welcome surprise .
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Watch for Volatility: If your shop’s income jumps or drops sharply, make measured tweaks—don’t chase every blip.
This mid-year stretch is where forecasting pays off. Hunt’s clients often complete a near-full tax-return “dry run” during Q3 to spot any large gaps before Q4 .
Q4: Confirmation Mode
Once September 15 passes, material swings are unlikely. Q4 is for locking in final deductions—Section 179 expensing, bonus depreciation, retirement top-ups—not for wholesale estimate rewrites. Hunt warns: “By this point, major changes should only come if you see something drastically different in your P&Ls” .
Timing Big Purchases
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Service Trucks & Heavy Equipment
If you’re buying a new F-250 purely for a tax write-off, wait until Q4 when your liability is clear. “An F-250 isn’t going to make your shop more money than your 2001 Tacoma,” Hunt laughs—buy when the asset drives revenue, not just to trim taxes . -
Tools & Diagnostics
Same logic applies: if new scanners or lifts solve a bottleneck today, pull the trigger. If you’re only chasing a deduction, hold off until December, when you know your bottom line .
LISTEN TO MY PODCAST EPISODE 174, FOR MORE ON THIS TOPIC.
Retirement Contributions: Baseline & Top-Up
Retirement funding is one of Hunt’s favorite deductions—“you get a tax break for putting money in your own pocket.” But front-loading a maxed-out plan can cripple cash flow. His rule of thumb:
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Set a Baseline: Commit to $5,000 per year—about $100/week or $1,250/quarter—to build a savings habit and lock in deductions early .
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Top-Up in Q4: If profits exceed expectations, add extra to reach the plan limit (including spouse or kids IRAs) before December 31 .
Monitor, Adjust, Repeat
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Monthly P&Ls: Compare each month’s net income to your forecast—and flag anything that drifts more than 10%.
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Mid-Year Check-Up: Use Q2/Q3 to recalibrate estimates based on six months of actuals.
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Year-End Review: Confirm Q4 payments against final projections, then lock in those bonus depreciation or Section 179 elections.
For a complete walkthrough of quarterly forecasting, tune into Episode 23 of the Business by the Numbers podcast—Tax Forecasting & Minimizing Liabilities.
Estimating taxes isn’t a compliance hurdle; it’s cash-flow management. Follow Hunt’s framework—placeholder Q1, data-driven Q2/Q3, confirmation Q4, business-first purchases, consistent retirement funding—and you’ll avoid penalties, keep more cash in the shop, and eliminate the April scramble.
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