New LLC

[CLEO247]

I formed a new LLC this year.   I also received earnings from my employer earlier in the year, but retired so no further income or withhold (W2 wages) will be received this year.   Do I need to file estimated tax payments and if so, how do I determine the amount to pay?

I wasnt sure if i had to file estimated payments since my LLC was new this year or if there was a reprieve the first year since estimating the taxes may be difficult.

thank you for your feedback.

[KNDavis]

Hi CLEO247,

Congratulations on your retirement! 

I'll make some assumptions about your LLC to help answer your question.  If this is a single-member LLC (in other words, you are the only owner), you'll report the revenues and expenses for the LLC on your personal tax return on a Schedule C.  If the LLC generates a profit, this will add to your W-2 and other income and potentially create a tax liability.  There is no reprieve for the first year of an LLC that is reported on your personal tax return.  

You didn't mention whether the LLC will be operational for 2024, but I'll assume you will conduct business activity.  The first thing you'll want to do is to estimate whether the LLC will generate a profit in 2024 and project your total taxable income for 2024 by adding the LLC profit to your W-2 income and any other taxable income.  This will allow you to estimate the total tax you'll owe.  After factoring in the Federal withholding from your W-2 income, this will tell you how much you'll want to pay in estimated payments.  

Any time you have income that does not have taxes withheld, you may need to make quarterly tax payments.

For 2024, quarterly estimated tax payments are due on 4/15/24, 6/15/24, 9/15/24 and 1/15/2025.  The first two dates are already past, but you can make payments on 9/15 and 1/15/25, if you estimate that you'll owe additional tax due to the LLC.  You should aim to have paid in either 90% of your 2024 tax liability or 100% of 2023 tax liability to avoid underpayment penalties.

The IRS expects you to pay your taxes throughout the year as you earn your income, so if the LLC will generate a profit, you'll definitely want to make quarterly estimated payments to avoid underpayment penalties.  You mentioned that you're retired; when you start collecting Social Security, that is another type of income that may require estimated tax payments if you choose not to have taxes withheld.

Here are some articles that will help you with this process.

A Guide to Paying Quarterly Taxes

Estimated Taxes: How to Determine What to Pay and When

Thanks for participating in TurboTax's Ask the Expert event today.  I hope this information was helpful!

Sincerely,

Kimberly, CPA for over 30 years