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Question for next years taxes. First time self employed sole llc (disregarded) as well as full time employed with w2

Kinda jumped head first into this and only had a few months of preparation, Sole LLC, disregarded entitiy EIN, disregarded entity IL tax id, as well as a full time  w2 job. I'm in quickbooks, and use turbo tax as well for the last 8 years so doing my own taxes is no new thing but doing taxes this next coming year is a whole new thing. I know I'll be filing a schedule c next year along with my w2. I know I need to pay my quarterly sales taxes. However,  I don't know if I need to make estimated IL state income tax and estimated federal income tax payments since I elected to be a disregarded entity and have a w2 job that is already withholding? Little background if it helps, head of household, 2 dependents, estimated $70k w2 next year, probably $10k at a max profit on my schedule c next year. Would love to get some advice and good answers

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1 Reply
Carl
Level 15

Question for next years taxes. First time self employed sole llc (disregarded) as well as full time employed with w2

Sales tax and income tax are two different things. Sales tax has nothing to do with an income tax return as far as reporting/paying it goes. (Though it is a deductible expense on the income tax return.) Sales tax is a state or more localized thing. You'll need to contact the authority that imposes the sales tax for details on how and when to pay it. Depending on the laws where you're at, sales tax may have to be paid monthly, or quarterly.

 

For the income tax you already know you'll use SCH C.  The federal tax is paid quarterly and you can pay it on line at www.irs.gov/payments. If your state taxes personal income you'll need to pay the state estimated income tax quarterly also. How/where you do that, depends on the state. Most states have the ability for you to pay on line.

When it comes to federal taxes, I recommend you send the IRS 20% of your *GROSS* business income each quarter. Then come tax filing time you'll easily be within $1K either side of your tax liability. The IRS does provide worksheets for you to figure it each quarter. But using the worksheets you'll find you'll be anywhere from 18-22% of your gross business income anyway. The worksheets are in publication 505 at https://www.irs.gov/pub/irs-pdf/p505.pdf on page 14.

I've been self-employed 16 plus years now, and have always just sent 20% of my gross earnings to the IRS each quarter. At tax filing time I usually get some of it refunded back. But in the two years I actually owed more, the highest was $472. Well within the $1K limit, so no penalties for underpayment of quarterly taxes was assessed.

 

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