One of the primary reasons that people use an LLC is the pass-through taxation that it provides. Instead of having to file a business tax return, you can simply file and pay your taxes as personal taxes because all of the LLC's profits are paid out to the LLC owners (members).
According to the Internal Revenue Service, you should estimate how much you will have to pay in federal taxes for the year and then divide that number by four. Then send that amount in each quarter to the IRS.
Estimated Tax Requirements
When you have an LLC, it is generally advisable to make quarterly tax payments. However, the IRS does not require every business to make quarterly tax payments. If you do not expect to owe taxes of $1,000 or more when you file your tax return, you do not have to make quarterly tax payments. If you did not have any tax liability for the previous year and you were a U.S. citizen or resident for the whole year, you can also avoid quarterly tax payments.
Besides paying federal taxes in this fashion, you also have to pay self-employment taxes. Self-employment tax is a term that is used to describe the taxes associated with Medicare and Social Security. When you work for someone else, your employer pays half of these amounts. When you have an LLC, you have to pay the entire amount yourself. This should also be included in your quarterly tax payments to the Internal Revenue Service.
Paying the Taxes
When you pay estimated quarterly taxes, you have to pay them by the quarterly due dates which are set by the IRS. The first due date is typically April 15, the second is June 15, the third is September 15 while the last due date is January 15 of the following year. You can choose to pay these estimated taxes with a check or money order through the mail. You can also pay them online with the electronic payment system from the IRS.
- Nolo: How LLCs Are Taxed
- IRS: Estimated Taxes
- Nolo: Paying Estimated Taxes
- Internal Revenue Service. "Estimated Taxes." Accessed Oct. 15, 2020.
- Internal Revenue Service. "Publication 505 (2020), Tax Withholding and Estimated Tax: When to Pay Estimated Tax." Accessed Oct. 15, 2020.
- Internal Revenue Service. "Publication 505 (2020), Tax Withholding and Estimated Tax: What's New for 2020." Accessed Oct. 15, 2020.
- Internal Revenue Service. "Self-Employment Tax (Social Security and Medicare Taxes)." Accessed Oct. 15, 2020.
Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.