Questions on how to handle income from single person LLC AND from unemployment income

[sutherlandws]

Hello.  I was unemployed in 2024 for 11 months (Feb-December).  I received regular income for February, and I received a severance pay, from which taxes were pulled.  I have 2 issues I would like help with.

A) I created a single person LLC for consulting purposes, and I received $10,500 in consulting fees.  I opened a separate business bank account, and they automatically pull taxes and put them in a separate account, but do NOT automatically pay the taxes to the IRS.  Both the income and the taxes are still sitting in my business account. So HOW do I report this income to the IRS and pay taxes? I know I was supposed to file quarterly taxes, but I did not receive the income until December, and larger than typical taxes were pulled from my severance check (as if I made that much per 2 week period for the entire year), so I suspect that I have paid over 90% of what I will owe, if I owe any. So I am not certain what to do now that it is after the quarter tax payment period.  

B) I received unemployment from the State of Texas.  In the application form, I explicitly selected the option to have the State pull taxes (they pull 10%) from my payments, and printed out the application form JUST before I hit 'SEND' to ensure I had a copy of it.  However, the State did NOT pull taxes from the unemployment income.  I am concerned that I will get some sort of penalty for not having paid taxes out of this income, even though it was not my fault.  My main error was in 'assuming' it was being pulled and not double-checking.  I was advised to go to the IRS page and there was a place that I could pay some amount of taxes outside of my normal tax filing, and that might avoid any penalties.  So how should I handle this?  Wait until I file my income taxes, or do something ahead of time on IRS.gov to pay for at least the 10% out of the unemployment pay.

Looking for some guidance here on these 2 issues.  Thanks!

[KrisD15]

If the bank pulled what they thought you would be taxed on the self-employment income and put that into a separate account, you would report the income the same way as if that never happened. 

Repot the full amount as income and also report your expenses. 

I am assuming you are a Sole-Proprietorship for tax purposes and file Schedule C to report your self-employment income. 

I also assume you instructed the bank to do the allocation to a separate account since it is not a bank's duty to withhold taxes from your deposits. 

Again, taxes not paid on unemployment would be your tax liability and calculated on your federal return. 

There is no opportunity to put the blame on the state even if you had asked when you applied. 

Compute the 2024 return and see if a penalty is assessed. You may not need to worry about it for 2024, but 2025 might be a different story so you might want to start making those estimated tax payments for 2025. 

According to the IRS:

"You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. If your adjusted gross income (AGI) for 2023 was more than $150,000 ($75,000 if your filing status for 2024 is married filing separately), substitute 110% for 100%."