Where the number comes from, why everything says DRAFT, and when quarterly payments are due.
Every transaction you label as business flows into a draft version of Schedule C, the form sole proprietors use to report business income and expenses. Income minus expenses is your profit, and the estimate figures your self-employment tax from that. Self-employment tax is the Social Security and Medicare you pay for yourself: an employer normally covers half, but when you work for yourself you pay both halves, about 15.3% of most of your profit.
Say you earned $50,000 this year and labeled $12,000 of spending as business. Your profit is $38,000, and the estimate is built on that. The details are handled for you: meals count at half, as the IRS requires, business miles you log as trips add a vehicle deduction, home office costs you have entered count their business share, and payments to contractors count as expenses like anything else (the contractors guide covers the 1099 side).
The estimate is a planning number, not a filing. ExpenseGhost is not a tax preparer, so nothing here gets filed and every number on screen and in your downloads is marked DRAFT. Use it to know roughly what you will owe and to set money aside through the year. Before you actually file, a licensed tax professional should look it over: the downloads on the Exports page are built to hand them exactly that.
The estimate covers self-employment tax, not your whole tax bill. Federal income tax, state tax, and anything from the rest of your household (a spouse’s job, investments, credits) are not in the number. That is why the app also suggests a set-aside of 25% of profit as a working cushion. You can adjust that rate in your tax settings.
When you work for yourself, no employer withholds tax from each paycheck, so the IRS expects you to pay as you go: four estimated payments a year instead of one big bill in April. The deadlines fall in mid-April, mid-June, mid-September, and mid-January of the following year, shifting a day or two when one lands on a weekend or holiday. The tax page shows the exact dates for the current year.
Once you send a payment to the IRS, mark that quarter paid on the tax page. That stops the reminders for that quarter and keeps your record straight. You can also point the app at the savings account where you park tax money, and the dashboard shows how your balance compares to your set-aside target.
The estimate is live: it recalculates from your books, so anything that changes your income or expenses moves it. New transactions arriving from your bank, relabeling something between business and personal, logging a mileage trip, or adding home office costs all shift the number. An invoice moves it when it gets paid, not when you send it, because the estimate counts income when the money actually arrives.
A moving number is the estimate working, not a bug. It should drift as the year fills in, then settle as your books get complete.
The estimate uses sole-proprietor math, so it applies if you file Schedule C: sole proprietors and single-member LLCs. If your business files a different return (an S corporation, partnership, or C corporation), the tax page tells you so instead of showing a number that would be wrong for you.
Your books still do the work. Instead of the Schedule C estimate, you get a DRAFT of your business return (Form 1120-S, 1065, or 1120) and a draft K-1 for each owner on the Exports page, bundled into the packet you hand your accountant.