I formed an LLC this year for my side job. I have a similar income as last year and received a refund when I filed last year. What additional steps do I need to take this year with an LLC?
Thank you for asking. First of all, congratulations on starting your own business. Regarding to your questions, I would suggest the following steps:
1. Do a good bookkeeping to find out the net income for your business.
2. Use tax calculator to estimate if you owe tax (pls include all income sources).
3. See if there is a need to adjust your tax withhold through your employer with Form W-4.
4. Pay estimated tax no later than January 15th if you owe more than $1000 in tax.
Doing estimated tax payment can help you avoid under payment penalties 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.
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Congrats on taking the step to protect your business by forming the LLC!
Merely forming the LLC does not have any tax impact, unless you are completing a tax form to make a special tax election. Forming the LLC does require you to keep up with whatever the specific state requires, which includes reporting and fees. You will continue to report your income and expenses the same way as last year on Schedule C, the self-employment section in TurboTax.
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