LLC sole proprietor

[akbotanydesign]

I am an LLC sole proprietor business owner.  
I noticed when I did my taxes there was no tax with holding.  I am the only employee.  I have sub contractors that do my work.  I give them 1099’s.  Don’t I need to withhold social security and other taxes from my earnings?

[JandKit]

akbotanydesign

New Member

posted

4m ago

last updated ‎September 30, 2021 12:55 PM

Hi akbotanydesig,

You are considered to be self-employed as an LLC Sole Proprietor. You can pay Estimated taxes quarterly if you so choose though. There are many benefits to being a sole proprietor but you should consider paying your taxes quarterly to avoid underpayment penalties when you file your return.

Here is information that may be useful to you:

https://turbotax.intuit.com/tax-tips/small-business-taxes/limited-liability-company-taxes/L5TDDlstC

[VolvoGirl]

Did you file your LLC on Schedule C in your personal tax return or file a separate business tax return for it?

If it is a Single Member LLC that is not an S corp it is a disregarded entity and you file it on Schedule C.  Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income.  If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.  

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23.  The SE tax is in addition to your regular income tax on the net profit.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 14 which flows to 1040 line 10a.  Turbo Tax automatically calculates the SE Tax and Adjustment.

[VolvoGirl]

You didn't notice all year you weren't paying in any withholding or taxes?   How did you expect them to be paid?

You need to be sending in quarterly Estimated payments.  You can still make some for this year 2021 so you don't owe too much again.

Turbo Tax will calculate the 1040ES estimated payments

https://ttlc.intuit.com/community/tax-payments/help/can-turbotax-calculate-next-year-s-federal-estim...

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).

To prepare estimates for next year you start with your current return, but be careful not to change anything.  For Online returns, if you can't get back into your return, Click on Add a State to let you back into your retun.

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.

Or Go to….

Federal Taxes or Personal (Desktop H&B)

Other Tax Situations

Other Tax Forms

Form W-4 and Estimated Taxes - Click the Start or Update button

To just estimate the remaining quarters put in that you paid $1 for the missed quarters so it will only calculate the remaining quarters.

How to make the Estimated payments

https://ttlc.intuit.com/community/tax-payments/help/how-do-i-make-estimated-tax-payments/00/25875

Here are the blank Estimates and instructions…..

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

The 1040ES quarterly estimates are due April 15, 2021, June 15, Sept 15 and Jan 18, 2022.   Your state will also have their own estimate forms.

Or you can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2021 Estimate