Many new LLC owners are not aware that they may be able to file taxes on a quarterly basis, depending on their tax situation.
The result is many LLCs end up filing taxes annually when they could be saving themselves some money by filing taxes quarterly. So, just what exactly does it mean to file taxes quarterly?
Estimated Tax And Filing Quarterly
When you file taxes on a quarterly basis, it means that you are filing estimated taxes instead of having an employer do it for you. Each quarter you make an estimation of your income, and then you pay the appropriate amount of money into that quarter's return.
Because most individuals' incomes do not reflect the profits and losses from running a business, it is best to file your taxes under the entity that most closely matches your business's needs.
Filing Quarterly Taxes For LLC Sole-Proprietorship:
If your company falls under this category, then filing quarterly taxes is pretty simple. You can simply list your taxable income and multiply it by the percentage that applies to you.
Another benefit is that if you file as a sole proprietor, then you may be liable to pay a self-employment tax—which can be upwards of 15%, whereas if you file as an LLC, partnership, or S-Corp, then your business does not pay self-employment tax.
Filing Quarterly Taxes For LLC Partnership:
If your business is taxed as a partnership, then you will need to file using form 1065. This form must be filed with both your personal income tax as well as corporate taxes.
However, you will only need to make estimated tax payments based on your share of the partnership's taxable business income.
Filing Quarterly Taxes For LLC Corporation:
Quarterly tax payments for LLC corporations are simple. You will need to file just like you would if you were filing every quarter, with the exception that when it comes time to perform your tax payments, you simply multiply what is owed by three instead of four.
Filing Quarterly Taxes For a Single-Member LLC :
Finally, if your LLC is a disregarded entity, then you will need to file quarterly taxes just like any other business since you will be paying self-employment taxes.
In general terms, profit and loss are calculated by deducting the business expenses of the LLC from its revenue. A business expense is one that is considered to be ordinary and necessary and one that a reasonable business would use.
Quarterly Tax Returns and Payment Due Dates:
At the end of the tax year, when you're in the system, IRS-estimated tax payments vouchers will be delivered. Whether or not IRS vouchers are sent, you are responsible for paying estimated taxes.
Estimated Taxes are compounded twice then divided into four installments throughout the year.
- January 15, April 15, June 15, and September 15 (of the following year) for Estimated Taxes.
- January 30 (for corporations only) & February 14 (for LLCs/partnerships) for Filing Corporate Tax Returns.
- April 17th, June 15th, September 15th, and January 31st (of the following year) for Filing Personal Income Taxes.
5 Steps to File Quarterly Taxes for LLC
Don't be scared by the idea of paying estimated taxes. We've broken down the procedure into five easy stages to make quarterly tax payments a snap.
Step 1: Check to see whether you're required to pay estimated taxes.
You are required to make estimated tax payments if you expect to owe at least $500 in federal taxes for the current year after subtracting your withholding and credits. You'll need to determine this by reviewing last year's return.
Step 2: Work out when you'll pay.
In general, the IRS will only allow you to pay quarterly taxes once each month and no less than two days after that month's end.
If your quarterly tax payments don't cover all four periods, you'll have to make up the difference with a payment for the annual return. If this is still not enough, it won't be an issue as long as you've paid enough in each quarter.
You'll need to make sure that your bank account is registered for direct debit or set up EFTPS before you can pay your quarterly tax.
Step 3: Calculate how much tax you'll owe.
Your first step of filing quarterly taxes for an LLC is to calculate how much tax you'll owe. In most cases, this will be between $0 and $2,500.
If your numbers are anything higher than that, it's time to start thinking about upping your weekly or monthly withholding by changing the number of allowances on your W-4 form.
Step 4: Fill out your tax return.
You can file your estimated taxes online by filling out Schedule(s) C-EZ, E, and/or F if you own a sole ownership LLC. If you're part of a multi-member LLC, then you'll be filing on Form 1065.
If you did not conduct any business and your net profit or loss is only $400 or less, you'll need to file Schedule(s) C-EZ. Otherwise, it's 1065 time! Don't forget to fill out the IRS Form 1040-ES every quarter!
Step 5: Make your quarterly tax payments and check the IRS website to see if it's reflected.
There are two ways you can pay your estimated taxes. The easiest method is EFTPS, which allows you to make a payment online or over the phone (1-800-555-4477).
If you want more flexibility in when and how much you pay quarterly taxes, then it's best if you send a check with your tax return. The post office can be a little unpredictable, so you should let the IRS know if it's sent or when it was sent.
Filing estimated taxes is no biggie when you think about all of the benefits that come with it. If you're not required to make quarterly payments, then why would you? Even though technically, the IRS doesn't take into account the money you've already paid in taxes, we're all about being on the safe side.
When is Form 1040-ESS Due?
Form 1040-ES is due by 1st April, 15th June, 1st September, and 16th January. After this, you will only need to pay the tax if your withholding plus quarterly estimates were not enough to cover your tax liability.
Should I File Estimated Taxes If Just Have a Side Business?
Yes, you should file estimated taxes if your LLC makes above $400. You can file quarterly or simply make one large tax payment for the whole year (but remember to pay it by 15th April).
Can I File My Own Business Taxes?
Yes, you can file your own business taxes if you have a side job. If not, then go to a CPA who is familiar with working with self-employed businesses.
LLC Quarterly Taxes: Conclusion
Don't put off filing quarterly taxes for an LLC or any other business. You can use this guide as a reference to make the process as easy as possible. So just follow those five simple steps, and you'll be all set!