Estimated Taxes Single Member LLC

[idktaxes23]

Do I need to pay estimated taxes if my revenue was less than my expenses? Two estimated tax payment deadlines have already passed. For the first in April, I think I overpaid because when I did the math, my expenses were greater than my revenue. I did this because I was confused and had other income unrelated to my business and accidentally included that income in the estimate based on last year's annual federal tax filing and the IRS estimated tax worksheet. As a single-member LLC business, I took out owner's draws to pay myself and used owner's equity to pay for some expenses which is why I still have a little money in the bank that is owner's equity. 

I'm confused because someone who is a bookkeeper told me that I should take out money for taxes before my expenses. However, aren't I supposed to pay expenses, then taxes, and then pay myself or put back into my business? Please let me know the correct order on how to manage this process.

[tagteam]

See the IRS web site below re the payment of estimated taxes.

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Note that as a single-member LLC, you are treated the same as a sole proprietor; you do not pay yourself a salary or any other type of remuneration for your services. 

[JandKit]

Hi idktaxes23,

Thank you for this question.

The Irs expects to see tax payments quarterly for income earned during any quarter. The calculation of whether enough is paid is decided at tax time. Mean while, the IRS expects to see payments each quarter if there has been earnings. The more prudent approach is to pay the estimated taxes timely and based on the very best information available. Most would opt to estimate the yearly amount and divide by 4. The more accurate approach would be to keep a talley of the income received each quarter and pay the tax.

It is possible to have a refund and still be subject to estimated taxes.

Remember the IRS expects taxes on the income as earned in the quarter without reqards to expenses.

Goodluck to you!