Do i need to run payroll when i am working on corp to corp basis?

[ashu-sharma-indi]

Do i need to run payroll when i am working on corp to corp basis?

First time I am doing some contract work where the other corporation make direct payment(Direct deposit) to my Business checking account every two weeks. It's the same billing rate and same number of hours. Do i need to run the payroll to pay myself? I know I need to pay federal unemployment tax, Federal taxes, states tax(no as i am working in Texas), medicare and social security(employer and employee). I am one member LLC. The only deduction i have is the SEP-IRA. Other deduction is medical insurance which i am paying out of pocket(COBRA). 

So do i need to run the payroll? I got a payroll software which is not expensive - around $15/month -patriot software and that generate the paystub plus does the direct deposit.

[VolvoGirl]

What kind of LLC are you?  Did you set up as a S corp?  If you are a Single Member LLC that is not a S corp you do not pay yourself.  It is a disregarded entity and you fill out a Schedule C in your personal 1040 tax return for it.  Then the Net Profit or Loss on Sch C is your actual income.    You pay Self Employment tax on the Net Profit.  The SE tax is to cover the FICA (SS & Medicare).  Both the employer and employee parts.  

[ashu-sharma-indi]

Thanks for quick response.

It's a single member LLC. I get direct deposit from the other corporation in my account every 2 weeks.

To calculate self employment tax on the net profit , one must use some software or tool or excel sheet, right?

How i can fill the federal forms or any other stuff like state unemployment taxes etc...

I am not able to get this part.

[VolvoGirl]

Are you going to use a tax program like Turbo Tax?  The tax programs figure it all automatically.  Did you use Turbo Tax last year?  

For your tax return You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.

And yes for keeping track of your income and expenses you should be using a program like Quicken or QuickBooks.  There is a QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed  return....

http://quickbooks.intuit.com/self-employed

You can buy the Desktop CD/Download program now here,

https://turbotax.intuit.com/personal-taxes/cd-download/

And the Online versions will open in December here, https://turbotax.intuit.com/personal-taxes/online/ 

You enter you business income.  Then you enter all your expenses.  That gives you the Net Profit or Loss on Schedule C.

 Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 27.   The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 4 line 57 which goes to 1040 line 14. The SE tax is in addition to your regular income tax on the net profit. 

[VolvoGirl]

Actually you really should go to a CPA or accountant to get it set up right and to understand it.  At least the first year.  

[VolvoGirl]

If you are a Single Member LLC And did NOT elect to be an S Corp.  it is a disregarded entity and you report it like self employment.  

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

[ashu-sharma-indi]

Oh that's cool, relevant information.

I use Turbotax desktop version(Home and Business) since 2017. I have this business since 2017 but only now some significant activities is happening for me(last quarter of 2019).

So according to you, I don't need these payroll software, right?

But why I need quickbooks also? I am just a single member LLC - an IT guy who is doing IT project at large corporation(which has an intermediate company). This intermediate company pays me directly - direct deposit into my business account every 2 weeks.

I use freshbooks to send free invoice - i don't need a software for that as my invoices are plain simple(not even excel sheet required).

I want to keep life simple. I go and do the work, i get paid and i file the taxes and tax return - that's it.

[VolvoGirl]

So you filled out schedule C in the past?  This is just more income on your sch C.  Nothing special about it.  You might get a 1099Misc if they pay you $600 or more for the year.  Did they have you fill out a W9 form when you started?  Do you have a EIN number or just use your ssn?

They aren't taking taxes out of your payments, right?  You're not going to get a W2 for it.

[Anonymous]

if you don't have employees and since you say you conduct business as a llc that has not made an election to be taxed as an S-Corp you are not an employee of the LLC.    if there are no employees, there are no payroll tax returns to file.    this seems to be the first year you have operated a business.   i strongly suggest that you use a pro to prepare your tax returns for the first year.   there are many tax laws that a taxpayer needs to comply with even operating as a single member LLC 

[ashu-sharma-indi]

Thanks for your responses. It's very helpful