Hello, I am active-duty military (earning $60k taxable annually) and my wife
and I started a SMLLC this January. Our best guess for 2012 earnings is about
$20k, so we know we need to do quarterly tax payments. We didn't fill out any
forms in April because we hadn't turned a profit by then, but now our SMLLC
has about $5k net profit. I have a series of questions, and I'll try to keep
them brief. Question #1 -- which tax forms should we fill out at the end of
this year (1040 with a Schedule C, Form 941, or something else)? Question #2
-- which tax forms should we fill out for our quarterly estimated payments
(maybe just a 1040ES)? Question #3 -- do quarterly estimated payments include
Medicare and Social Security, and do we need to do any extra forms for these?
Question #4 -- we set-up an EFTPS.gov account as a business instead of as a
person, was that the right decision for an SMLLC on-the-side? Question #5 --
can we submit our tax forms and payment via EFTPS.gov, or does anything need
to be snail-mailed? Question #6 -- what serves as a "receipt" for estimated
tax payments? Thank you all for your help!
Actually, the estimated taxes paid by the SMLLC need to include, well, not
social security or medicare taxes but the equivalent, self-employment taxes.
I think the "guesstimate" for the right estimated tax percentage equals the
self-employment tax rate (13.3% in 2012) plus a bit for income taxes (maybe
another 6-8% if you're subject to income taxes?)
Stephen L. Nelson, CPA, Author QuickBooks for Dummies
Jennings Group | Window Shopper |
6/21/2012 - 12:11 pm
Congratulations on starting a new business!!
Answers to your questions:
1. As a single member LLC, you will fill out Sch C on Form 1040 with the IRS. This business income/loss will be combined with any personal income. You will be taking care of all Social Security and Medicare taxes through the 1040. Form 941 is only used for "employers".
2. You are right . . . 1040ES for estimated quarterly taxes. The IRS "likes" these payments to be the same each quarter, but it is okay if not.
3. You will need to send in enough estimated taxes to cover your federal income tax (on net profit), Social Security and Medicare taxes. If you pay in too much, you will get a refund. If you pay in too little, you will owe (and possibly penalty/interest). This is all done through the 1040ES payments.
4. The only problem with setting up your EFTPS as business instead of as personal is you may not have the option of paying 1040ES payments. I have not set up a personal account in sometime, but I know 1040ES is not available as a business.
5. If you make your payment through EFTPS (and code it correctly) you do not need to snail mail anything.
6. If you end up mailing the ES payments, your cancelled check will suffice as your receipt. If you make the payments through EFTPS, your bank statement debit will be your receipt.
Things of interest to remember:
** There may be some credits for military and would be worth checking into.
** You should have an EIN number for your business (if you don't, you need one - it is free from irs.gov). This way you don't have to give out your SSN.
** I live in TN and an LLC is required to fill out Franchise and Excise tax forms each year as well as complete an Annual Report. You need to check the requirements where you live to verify that you are compliant. Also, check with your local city/county requirements. You may need to complete a business tax return for that as well.
If you need further help, you can contact me.
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Estimated tax payments are made to the IRS using form 1040ES, which you can
print from the IRS web site. Just be sure to print the form with the
appropriate filing date. You should plan to pay 10-15% of your earnings less
expenses. You do not pay Social Security or Medicare. When you file your
taxes at the end of the year, you will then pay self-employment tax on your
net earnings over $400. That is your SS and Medicare payment on self-employed
income. You generally need to mail in your estimated tax payment along with
the form you printed from the IRS web site. Your cancelled check is your
receipt.
SeattleCPA | Window Shopper | 7/27/2012 - 9:05 am
social security or medicare taxes but the equivalent, self-employment taxes.
I think the "guesstimate" for the right estimated tax percentage equals the
self-employment tax rate (13.3% in 2012) plus a bit for income taxes (maybe
another 6-8% if you're subject to income taxes?)
Jennings Group | Window Shopper | 6/21/2012 - 12:11 pm
BizResearcher | Window Shopper | 5/28/2012 - 7:57 pm
print from the IRS web site. Just be sure to print the form with the
appropriate filing date. You should plan to pay 10-15% of your earnings less
expenses. You do not pay Social Security or Medicare. When you file your
taxes at the end of the year, you will then pay self-employment tax on your
net earnings over $400. That is your SS and Medicare payment on self-employed
income. You generally need to mail in your estimated tax payment along with
the form you printed from the IRS web site. Your cancelled check is your
receipt.
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