Quarterly taxes for LLC

[Debbieannadams13]

I have had a side gig as a sole proprieter for 2 years and despite not having paid quarterly taxes yet, I have always had a tax refund due to my husband's tax withholdings. He has a W2 as a full-time employee and we file taxes jointly. In February of this year I incorporated as an LLC and I expect to make at least double the revenue that I did last year. How can I estimate my quarterly taxes to minimize unnecessary withholdings?

[Cindy4]

An LLC is a separate legal entity, but the IRS doesn’t consider it a separate tax entity.  From the IRS viewpoint a single member LLC is called a disregarded entity and is still taxed the same as a sole proprietor, unless you make an election to be taxed as a corporation using form 8832.  If you did make the election to be taxes as a C-Corp or S-Corp, you can become an employee of the corporation and pay yourself a reasonable salary, which will be an expense for the corporation.  But you will also have to file a corporate income tax return, quarterly payroll tax returns, and make payroll tax deposits via the Electronic Federal Tax Payment System - EFTPS.

Here is some more in depth information on the other payroll tax implications of doing that:
 
Corporate Tax Overview

However, if you didn't make the tax declaration with the IRS, you will still be taxed as a sole proprietor.  Our tax system is “as you go” so you will want to estimate your profit quarterly, and pay based on that estimate.  You’re responsible for all of your FICA – Social Security and Medicare – along with income tax on your profit.  FICA is going to be 15.3% and your income tax will be based on your overall taxable income bracket.  

Determining what to pay and when is crucial to avoid penalties and interest on underpayment of tax.  Here is a great resource on how to pay estimated taxes.

 When you file your 1040 tax return at the end of the year, if you didn’t make the entity election to be taxed as a corporation, you will file a Schedule C along with your 1040.

Hope this helps!

Cindy

[FranklinF]

The self-employment tax rate is 15.3%. This tax applies to individuals who work for themselves and covers Social Security and Medicare taxes. 

Here's a simplified breakdown of how to calculate self-employment tax:

1. Determine your net earnings: Calculate your self-employment net earnings by subtracting your business expenses from your gross income (use Schedule C).
2. Calculate the taxable base: Multiply your net earnings by 92.35% (0.9235).
3. Calculate the self-employment tax: Multiply the result from step 2 by the self-employment tax rate (15.3% or 0.153). This gives you the total self-employment tax amount. 

Let's say your net earnings from self-employment are $50,000:

1. Taxable base: $50,000 * 0.9235 = $46,175
2. Self-employment tax: $46,175 * 0.153 = $7,064.78.
   

Therefore, your estimated self-employment tax would be $7,064.78.

Important Notes:

• Social Security Wage Base: The Social Security portion of the self-employment tax (12.4%) has a wage base limit, which is $176,100 for 2025. If your net earnings exceed this amount, you'll stop paying the 12.4% Social Security tax on the excess, but you'll still pay the 2.9% Medicare tax on all your earnings.
• Deduction for One-Half of Self-Employment Tax: You can deduct half of your self-employment tax when calculating your adjusted gross income (AGI), reducing your income tax liability. 

For a MORE PRECISE CALCULATION, especially if your earnings are near or exceed the Social Security wage base, consult IRS Schedule SE. 

2025-2026 Quarterly Estimated Tax Payment Due Dates:

• 1st Quarter:   January 1 – March 31, 2025 - Due Date: April 15, 2025.
• 2nd Quarter: April 1 – May 31, 2025 - Due Date: June 16, 2025.
• 3rd Quarter:  June 1 – August 31, 2Dealership5 - Due Date: September 15, 2025.
• 4th Quarter:  September 1 – December 31, 2025 - Due Date: January 15, 2026. Y

You may estimate your overall Married Family Joint Taxes using TurboTax Personal Tax Calculator & Tools. Tax Calculator 2024 , or any other Tax Calculator available.

Lastly, the above is intended to give you a general idea of how to approach your tax situation and you are STRONGLY ENCOURAGED to consult a Tax Professional about the specific circumstances of your tax situation to obtain the Best Possible Results when filing your Tax Returns. 

Kind Regards,
Franklin
TurboTax Expert

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