Hello,
My husband and I both have full time corporate jobs and we have our own business which is an LLC partnership. We did not know about quarterly payments until recently, we are not exactly sure how to file or make payments since we don't want to get penalized. How can we calculate how much we will be filing for taxes if we are filing married? Will be submit both 1040 and 1065 for our business? It's our first year and we are both so lost and confused on how to do taxes
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You'll have to file both a 1040 and a 1065 unless you're in a community property state.
is there a way to calculate our quarterly taxes to make payments or any given payment is fine to not get penalized?
is there a way to calculate our quarterly taxes to make payments or any given payment is fine to not get penalized?
Try any online calculator including this ONE
Recommend strongly that you see a tax pro.
You really should see a professional to help set you up, at least for the first year.
You need a 1065 partnership return because you formed an LLC, unless you live in a community property state, then the rules are different. To prepare the 1065, you will need Turbotax Business, which is a different program than the personal version, and is only available for PC, no Mac or online version. Form 1065 is due March 15 unless you get an extension, and the late fee is $200 per month per partner.
You don't owe taxes on the 1065 partnership return. That just reports your income and expenses and passes through the income to each partner on a K-1 statement. Each partner enters the K-1 on their personal tax return and the income is added to their other taxable income from W-2 jobs or anything else. In your case, both K-1s will be reported on your joint tax return. This is where you will owe additional income tax and could be assessed a penalty if you don't have enough tax withheld.
Estimated payments are due April 15, June 15, September 15 and January 15. A good rough estimate is 25-30% of gross income or 35% of net income after expenses, because you will owe 15% self-employment tax, plus 12%, 22%, or 24% income tax (for most taxpayers). You can use the TaxCaster to forecast the tax you will owe or the IRS calculator.
https://www.irs.gov/individuals/tax-withholding-estimator
Your job withholding is counted as being paid to the IRS evenly over the whole year, while estimated payments are recorded when they are actually paid. This gives you a "trick" to avoid penalties for not making estimated payments. I will try to explain.
Suppose your W-2 withholding covers your tax on your work income, and you expect your income tax plus self-employment tax on the partnership earnings to be an additional $10,000. If you pay via estimated payments, the IRS will want to see 4 payments of $2500. Even if you pay $5000 in September and January so that you are caught up, you could be penalized for not making the first two estimated payments. (The penalty is 0.5% per month, plus another 8% APR of interest, so missing the April 15 payment of $2500 would result in a penalty of about $150 and interest of $200, while missing the June payment would result in a penalty of about $100 and interest of $115.)
However, if you expect your taxes will be $10,000, you could increase your taxes withheld at your current W-2 jobs instead of making payments. If you are paid at the end of the month, there are 5 more paychecks for each of you, and you could ask for extra withholding of $1000 per month each by giving your employers new W-4s with the extra withholding in box 4c. Because the IRS treats withholding as spread out evenly over the year (even if it is not) you completely avoid any underpayment penalties on the partnership earnings, as long as the total amount withheld is at least 100% of last year's tax bill or 90% of this year's tax bill. The key word is withholding--making payments up to 90% of your tax bill doesn't avoid the penalty for missing the first two quarters, but having withholding does allow you to avoid the penalty.
Of course, this may be difficult if your partnership income is variable or uneven, since you are locking in a certain amount of withholding that is not as easy to change. But, if you can estimate the amount of taxes that you missed paying for April and June, you could add just that amount to your withholding for the rest of the year, and then make proper quarterly payments for your last two quarters, and I think that would work out as well.
I still do recommend professional advice to set up your books, create an accounting system that works for you, explain any other rules that you might not know about, etc.
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