My husband is a truck driver and has an LLC. Should he pay quarterly taxes? If so, how does he estimate income?

[nbschick]

I am very confused as to how to figure this out; I would appreciate any assistance!

[Opus 17]

The first question is, is this a single member LLC (disregarded entity) or a multi-owner LLC?

[nbschick]

Sorry, single member. He works for one specific trucking company and receives settlements for each pay period.

[SweetieJean]

Do they issue him a 1099-MISC?

[TaxGuyBill]

You probably already know this, but don't forget to file the Heavy Highway Vehicle Use Tax Return.  It is a completely separate filing, usually due August 31st (except for new trucks).
<a rel="nofollow" target="_blank" href="https://www.irs.gov/uac/about-form-2290">https://www.irs.gov/uac/about-form-2290</a>

Also, if he is an over-the-road trucker that is gone overnight, he may qualify for meal deduction for each day he is gone overnight (it sometimes depends on his specific circumstances).

If this is a new business, it may be a good idea to consult a tax professional for at least the first year.
<a rel="nofollow" target="_blank" href="http://taxexperts.naea.org/">http://taxexperts.naea.org/</a>

[Opus 17 · Accepted solution]

A single member LLC is normally a "disregarded entity" and he would report his income and expenses on a schedule C like most other self-employed persons, independent contractors and so on.  (He does have a choice of filing a form to be treated as a corporation and file a corporate return, but that is beyond my ability to answer.)

https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-compan...

So as a disregarded entity, he files a schedule C.  This is a form that calculates his business income, expenses, and net income.  He pays self-employment tax on the net income, this is the self-employed version of social security and medicare tax.  The net income also goes over to his personal tax return where it is added to any other income (stocks and bonds, spouse's income, W-2 side job, etc.) and is subject to personal deductions like mortgage interest, property taxes and charity deductions.  Then he pays income tax on the final amount.

He is required to make quarterly estimated tax payments.  Depending on his total income and deductions (plus your income if you work and plan to file jointly) then the estimated payments will be 15% for self-employment tax and 15%-25% of income tax, both on the net income (after expenses).  Due dates are

April 15 for income from Jan-March

June 15 for income from Apr-May

Sept 15 for income from June-Aug

Jan 15 for income from Sept-Dec. (they are not all 3 months each)

Payments can be made on the IRS web site, be sure to indicate that the payments are for a 2016 form 1040ES (estimated tax) https://www.irs.gov/payments

Turbotax is not very helpful at calculating estimated payments but if you were to use Quickbooks or Quickbooks Self-Employment edition to track his income and expenses (mileage, gas, repairs, meals, out of town lodging, etc.) then Quickbooks has a calculator for estimated payments.  I believe there is a web-based version so he  could enter expenses on the road and not be tied to a home computer.

He needs to keep very good records of miles and expenses.  And there are special rules for over the road truckers that I don't know.  Someone else may be able to help.

[Opus 17]

@VolvoGirl @Critter#2 do you have more help for an OTR trucker on schedule C?

[GP70]

Since your husband is a truck driver, I assume he has his own truck and contracts his trucking service with various customers.  If he set up a single member LLC, he can file a Schedule C with the 1040 married filing joint tax return for you and him.  The schedule C allows your husband to deduct his trucking expenses from his trucking income to establish his self employed income.  His self employed income is combined with other income such as a W-2 for you and the self employment income is subject to income tax and self employment tax (this self employment tax is a gotcha) when it is tax filing time.  If you want to avoid a possible tax penalty at the end of the tax year, it is prudent to submit estimated taxes for the total income on your tax return.  One way to define your estimated tax is to use the tax paid for the prior year and be sure you pay that amount of tax for the current year.  If you have not generated a Schedule C for a prior return, I suggest you get some tax guidance from a reliable tax preparation firm (an enrolled agent with HR Block will work) to help you with defining estimated taxes in the future.

[david32]

You're probably better served by filing to be treated as a S- corp. for Federal tax purposes; this way you you avoid self employment taxes.  It's a bit more paperwork, but given his occupation, you will probably   pay lower taxes to boot.

Also, if the IRS has not said you need to pay quarterly payments, don't. As long as you don't owe over $400 in taxes at year's end, you will not need to pay quarterly. Thus, you have the money which can earn interest, and in December, run a mock return and figure out what you need to pay by Jan 15 of the following year to stay within the $400 rule.

[VolvoGirl]

Never heard about owing $400.  You pay SE tax on a Net Profit of $400 or more.

For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
 
- 2. You expect your withholding and credits to be less than the smaller of:
    90% of the tax to be shown on your current year’s tax return, or
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

[Opus 17]

I don't agree with this at all.  As an S-corp, the driver must pay himself a fair and legal salary for his work, including paying FICA and medicare withholding and the company has to match it.  If he does not take a salary and only takes the profit from the company (income tax but no SE tax), then he (1) never builds up retirement or disability credits in the social security system, and (2) is committing tax fraud that can send him to jail.  The S-corp has way more paperwork for reporting salaries and must pay withholding and employment taxed quarterly on form 941 if the amount is more than $1000 (and if the corporation doesn't owe more than $1000 of tax quarterly he would be earning so little that he would be better off on welfare).  The S-corp also has to follow all kinds of rules for employees that a sole prop doesn't (worker's comp, unemployment insurance, minimum wage, etc.)  Not a step to be taken lightly or by beginners.

[TaxGuyBill]

I completely agree with Opus.  Never make a decision to be a corporation without consulting a tax professional.  Filing for a corporation is expensive, and no, you don't necessarily save on Social Security and Medicare taxes.  I can't tell how how much MORE many people have to pay in taxes and tax prep fee because they unknowing opened a corporation based on some 'blanket' advice that a corporation can save them money.

[cardinalviper]

My husband and I set up an S Corp with each of us owning 50%.  We paid him a salary one time each year at the year end.  We still had to file the form 941 quarterly for the federal and state withholding taxes showing a zero amount being paid out to an employee for that quarter.  It is definitely more complicated than a sole prop, but in our situation it was easier than figuring the quarterly taxes.

[TaxGuyBill]

@cardinalviper   Easier, yes.  Legal, maybe not.
<a rel="nofollow" target="_blank" href="https://www.dol.gov/whd/state/payday.htm">https://www.dol.gov/whd/state/payday.htm</a>

[cardinalviper]

This was the way our accountant set it up and the IRS and our state tax office agreed as long as we filed the quarterly forms with a zero amount.