Im using QBs self for my single member LLC. I am paying my est. taxes under my SSN' as est. from last years taxes but it seems the LLC has est. taxes as well. Should I pay estimated taxes for both my LLC and myself?
The IRS considers a single-member LLC to be a disregarded entity. So it doesn't matter if you pay estimated taxes under your SSN, or your EIN. The EIN is tied to your SSN, so it doesn't matter.
Also, the way you worded your question makes me think you are "paying yourself" as an employee of your LLC. The owner of a single-member LLC is not, and can not be, an employee of the business. Under no circumstances will you ever issue yourself a W-2, 1099-MSIC or any other type of tax reporting document. Income earned by the business is considered income earned by you. The only difference is, you will pay an additional 15% (approximately) on the income earned by the business. That's the Self-Employment tax, which is basically the employer side of Medicare and Social Security.
Okay thanks! No I'm not paying myself as an employee or 1099. Its just that, I do think the estimated taxes (based on last year's self employment) are low and just don't want to be penalized for it come tax season. Does the IRS penalize you for earning more than estimated/ underestimating payments?
At tax filing time, if the amount you owe is 10% more than your total tax liability, only then is an underpayment penalty assessed. I always send in 20% of my gross business earnings each quarter. That practically guarantees me a refund every year and I'm never assessed a penalty for anything. For me, 20% easily keeps me within 10% of my total tax liability every year. Some years I get a refund, some years I owe. But if I owe, it's always less than 10% of my total tax liability.
Carl, does the owner of a single-member LLC pay state and federal unemployment taxes? I cannot seem to find a definitive answer.
There is no such thing as federal UC tax. If your single member LLC has employees, then the payment of UC tax depends on the requirements of your state. I do know that in FL the UC tax is definitely paid if your business has employees. But in FL the terminology has changed. It's no longer called the Unemployment Compensation Tax. It's now called the Re-employment Tax. You can read about it (for Florida employers) at <a rel="nofollow" target="_blank" href="http://floridarevenue.com/taxes/taxesfees/Pages/rt_rate.aspx">http://floridarevenue.com/taxes/taxesfees/Pages/rt_rate.aspx</a>
BTW - If your single member LLC does have employees, if you use Quckbooks already for your business, you can purchase the payroll module for it, set it up for your particular state/location and it will guide you through all the withholdings you need to make from employee paychecks, as well as withholding matches and other things your business needs to pay to the state, local city/town if required, as well as the federal stuff.
Do note that if you are on QB 2017 or older, I don't know if you'll need to update to the 2018 version for the new tax laws.
@Carl There certainly is Federal Unemployment Tax. Form 940 (FUTA).
@johnbaxtertrabol No, the owner of a Sole Proprietor does not owe Federal Unemployment tax on their business profit. I am not aware of any States that require it either, but you may want to check with your State.
In the event the Single Member LLC has filed the election to be taxed as a corporation, that changes things, and I would HIGHLY recommend going to a tax professional if that is the case.
@TaxGuyBill Thank you, I am located in Texas. I figured that as a sole prop, I do not pay myself wages. I am the owner and am compensated through a distribution of profits. Meaning I am not an employee, meaning I do not pay into or receive eligibility of unemployment. I have not filed to be a corporation for that very reason. Let me know if my line of logic is coherent. Thanks again.
@TaxGuyBill thanks. When I started my business 13 years ago I hired one employee that only lasted three weeks before I let them go. Well, actually two. But the first on only lasted a day and a half. I do remember dealing with the state UC tax, and perhaps on the federal side since I let QB do the work, I just didn't see that.
Pigy-backing off of this question. I am a single-member LLC and I have an EIN. I enrolled in EFTPS to pay quarterly taxes under that EIN. My accountant told me to pay under form 1040-ES, but that form wasnt on the list. After talking to a customer service rep at EFTPS, they said that 1040-ES will only show up if you are registered under your SSN and that I must use 941 to pay under the EIN. Is this going to affect anything, or will everything be fine if I pay under 941, as a single-member LLC?
If your single member LLC does not have any employees then your accountant is correct. Note that the owner of a single member LLC can not be an employee of the business they own.
So if you have no employees you can pay at www.irs.gov/payments each quarter, and do so under the SSN of the business owner. Otherwise, with employees you must go the 941 route. Now for the 941 depending on the income of your business, you "could" be required to file the 941 monthly. But for 90% of small businesses with employees, they don't come anywhere near that requirement and are just fine filing/paying quarterly.
Note that if your state taxes personal income, the filing requirements for state taxes could be different from federal taxes. So don't let that get past you or the fines and penalties will be a real killer at tax filing time.
When paying your quartarly estimated taxes are you required by the IRS to send in the exact same amount every quarter?
Or can you just calculate what you make each quarter and send in 20% of that?
@raidrmom61 wrote:
When paying your quartarly estimated taxes are you required by the IRS to send in the exact same amount every quarter?
Or can you just calculate what you make each quarter and send in 20% of that?
You can pay estimated taxes in any amount at any time for the tax year.
When paying your quartarly estimated taxes are you required by the IRS to send in the exact same amount every quarter?
No. You can send in $2000 for one quarter, and $1 the next quarter. THen if you have a quarter with absolutely no provide, you don't have to send in anything.
Generally after your first year of self-employment you'll have a fairly good idea of what you're going to make the next year. So for example, if in the first year:
- YOu make $1000 the first quarter and send the IRS $200.
- You make $5000 the second quarter and send the IRS $1000
- You make $10,000 the third quarter and send the IRS $2,000
- You make $3000 the third quarter and send the IRS $600
So overall you made $19,000 the entire year. It's a good bet that you're going to do a bit better your second year, and with the above numbers it looks like the 4th quarter is the "slow season" for the business. So based on that, my guess is that I"m going to make at least $22,000 my second year. That would be an "average" of $5,500 each quarter. Twenty percent of $5,500 is $1,100. So regardless of what I make each quarter I'm sending the IRS $1,100 each quarter.
Now lets suppose I do the same for the first two quarters as I did my prior year in business. But for the third quarter I make a whopping $20,000 profit in just that quarter alone. That means I'll be making $10,000 more for the current tax year, than I did the previous tax year.
So I'll just add another $20 to my planned $1,100 third quarter payment, and send the IRS $2,200 for that quarter. I could also split that 20% between my last two quarterly payments if I wanted to also, if I again expected my fourth quarter to still be my "slow season" like it was the previous year.
my answer would be that a single member LLC with no employees, you are not an employee, does not pay unemployment compensation taxes. such taxes are based on wages so with no wages no UC taxes. That is for sure for Federal purposes. what state do you live in? we may able to check for sure but I'm virtually certain that the same rules would apply.
however, many states impose an annual franchise or similar tax on an LLC.
in addition if your state taxes income, the LLC income will be included in your personal income tax return.
should have added a caveat because many threads omit significant information. so the answers based on what's given are generally correct. but once the OP starts adding details, the previous answers are totally wrong.
if you are an LLC that has elected to be taxed as an S-Corp then:
1) you are an employee
2) the IRS and tax laws require you to take a reasonable salary for services performed
3) not only would you have to pay state and federal and state UC taxes on the salary, but fica and medicare taxes would also have to be paid at the corporate level
4) the activities would not be reported on schedule C. an S-Corp return would have to be filed and then the net income flows to schedule E. any profits after the salary are not subject to payroll taxes.
my answer would be that a single member LLC with no employees, you are not an employee, does not pay unemployment compensation taxes.
That is correct. UC taxes are paid to the state, not the IRS or other federal agency. I had to pay UC taxes my first year, but only for the 3-4 weeks I actually had an employee. Back then, the U.C. tax was paid only on the first $7K or so of employee earnings. Don't know what it is now though, as I've not had employees for 18 of the 19 years I've been in business.
for companies with employees, besides possible state UC taxes there are federal UC taxes form 940
@Anonymous I don't recall fed UC taxes. But then it was 14-15 years ago for me and maybe I just forgot. Unless FED UC taxes "kicked in" sometime after 2005 maybe?
Yes. If you have a single member limited liability company (SMLLC) then no estimated taxes would be paid on behalf of the LLC. The IRS considers this a disregarded entity and all income and expense is reported on your individual tax return. Pay all and any estimated taxes under your social security number (SSN).